A sustained weekly improvement in the labor market would be a sign that the economy is improving — something that could sway voters ahead of the November election.
But “sustained” isn’t happening. Instead, an unexpected 1 million-plus increase in jobless claims last week reinforces forecasts that improvement in the labor market will come in fits and starts, Bloomberg reported.
Applications for U.S. unemployment benefits unexpectedly rose to more than 1.1 million in the week ending Aug. 15, Labor Department data showed Thursday. In the previous week ending Aug. 8, continuing claims — the total number of people in the U.S. claiming ongoing unemployment assistance — decreased to 14.8 million, the lowest since early April.
New York, Texas and New Jersey reported large increases from the previous week.
The latest uptick likely represents a pause in the recovery rather than a substantial change in direction.
The economy has recovered about half the jobs it lost in March and April but unemployment is still nearly three times its February rate. Small businesses are disappearing and companies are going bankrupt.
“While there has been a steep decline from crisis peaks, the fact that five months into the crisis initial claims are running at 1.1 million per week is, in absolute terms, very bad news,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez, Inc. wrote in a note.
Up to 18 million parents may have put plans on hold to look for work due to school closures and childcare restrictions, according to Bloomberg Economics estimates. This could be holding back the U.S. labor market recovery.
The $600 weekly jobless benefits expired at the end of July. Democratic and Republican lawmakers have not reached an agreement on how to extend them. President Donald Trump signed an executive action to provide $300 a week in federal support to most unemployment benefit recipients.
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Meanwhile, claims for Pandemic Emergency Unemployment Compensation (PEUC) have grown exponentially — a concern for economists who see it as a sign of a weakening U.S. labor market in the coming months, Axios reported.
PEUC is a CARES Act program for unemployed people in the U.S. who have exhausted the 26 weeks of unemployment benefits they get from their state. Claims have increased from 27,000 people on April 11 to 1.3 million as of Aug. 1.
“The real tsunami is coming,” Mark Zandi, chief economist at Moody’s Analytics, told Axios. “My guess is at this point, hiring in the industries that have been hit hard is going to abate.”
