US jobless claims rise to 419,000 from epidemic low

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Washington (AFP) – The number of Americans seeking unemployment benefits rose last week from the lowest point of the pandemic, although the labor market appears to be recovering on the strength of a reopening economy.

The Labor Department said Thursday that unemployment claims increased last week to 419,000, the most in two months, from 368,000 in the previous week. The number of first-time applications, which track layoffs in general, has fallen steadily since it topped 900,000 in early January.

Economists have described last week’s increase as likely a quick signal caused by some one-off factors and in part as a result of the inevitable falter in the weekly data. Jobless claims jumped last week, for example, in Michigan, where General Motors announced it was halting truck production due to a shortage of supplies.

“I am not concerned that this reading indicates a sudden weakness in labor demand,” said Stephen Stanley, economist at Amherst Pierpont Securities. “In fact, I’m pretty sure it’s not.”

Americans are shopping, traveling and eating more as the pandemic wanes, boosting the economy and forcing businesses to scramble for more workers. Companies have recorded the largest number of available jobs in the past two decades as data has been tracked. Hiring has boomed, although companies say they often don’t find enough employees with the wages they’re willing to pay.

At the same time, analysts have become concerned about the potential economic consequences of rising confirmed viral infections with the spread of the highly contagious delta variant, especially among the unvaccinated. The US seven-day rolling average of daily new cases accelerated over the past two weeks to more than 37,000 as of Tuesday, from just under 13,700, according to data from Johns Hopkins University.

Business complaints about not being able to find enough workers led 22 states to prematurely end the $300-a-week federal unemployment benefit, which comes alongside the state’s unemployment aid. Twenty states have ended their participation in two other federal programs — one that provides benefits to self-employed and temporary job workers and one that serves people who have been unemployed for six months or more.

Officials in two other states, Indiana and Maryland, have sought to end supplemental assistance programs but have been blocked by court rulings. Nationwide, all programs will end in early September.

Early cuts to help with expanded unemployment have contributed to the steady decline in the number of people receiving unemployment benefits. That number fell to 12.6 million in the week ending July 3, the most recent period for which data is available, down from 13.8 million in the previous week. More than 600,000 recipients of unemployment assistance have been cut off in Texas alone.

The long-term decline in claims for unemployment assistance coincides with an acceleration of economic growth. The US economy is believed to have expanded rapidly during the April-June quarter as Americans, pouring in cash from stimulus checks and from the stock market and real estate stocks, ramped up their spending.

The government said last week that purchases at retail stores and restaurants rose in June. Retail sales are approximately 20% above pre-pandemic levels.

Unemployment numbers fell as companies ramped up hiring. In June, employers added 850,000 healthy jobs, further evidence that reopening the economy was driving a robust recovery from the pandemic recession.

Jobs data for June also indicated that workers were at an advantage because companies, desperate to fill positions, were offering higher wages. Average hourly wages increased 3.6% over the previous year. However, the economy still has 6.8 million fewer jobs than it did before the virus outbreak in March last year.

Claims for unemployment assistance are usually seen as a rough measure of the pace of layoffs. During the pandemic, many states have suffered from fraud allegations that distorted data.

An oversight report released this week found that states distributed $12.9 billion in excess unemployment benefits payments from April 2020 through March, with about a tenth of the amount turning out to be fraudulent. Some of the remaining funds may also be fraudulent but will not be classified as such until investigated.

The GAO also found that many unemployed people still had to wait a long time for unemployment benefits to be processed and approved. Nationwide, about 1 in 10 people who first received benefits in May waited more than 10 weeks to receive them.

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