Here’s why there’s a backlog of claims for unemployment and why it’s only getting worse.
Although the nation is partially recovering from its steepest-ever recession amid the COVID-19 pandemic, businesses continue to lay off hundreds of thousands of workers as they grapple with fewer sales and depleted federal aid.
More than 857,000 Americans filed first-time applications for unemployment insurance – a rough measure of layoffs – last week, up about 20,000 from the previous week, the Labor Department said Thursday. J.P. Morgan had estimated that 850,000 people sought benefits. The figures are not seasonally adjusted.
More than 55 million workers have filed for benefits over the past six months. While the weekly figures have trended down since peaking at 6.2 million in early spring, here’s some perspective: The previous all-time high for weekly claims on a non-seasonally adjusted basis was about 1 million during a recession in 1982.
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Continuing claims, which represent all Americans still receiving unemployment checks with a one-week lag, rose to 13.2 million from 13.14 million the previous week. Economists have been following that figure more closely because it includes all those still unemployed as well as people who have returned to work as businesses have reopened.
“It is especially concerning that the pace of layoffs has not slowed more materially even though the economy has reopened more fully, and more and more businesses have come back online,” says economist Rubeela Farooqi of High Frequency Economics. “This is indicative of the ongoing disruptive nature of the virus that continues to interrupt activity, resulting in job losses. The risk now comes from another round of virus outbreaks in coming weeks.”
The numbers have been volatile in recent weeks as COVID-19 spikes in the South and West led nearly half the states to pause or reverse plans to allow shuttered businesses to reopen. That setback partly offset the easing of restrictions in other states that prompted many firms to rehire workers. Generally, U.S. cases have fallen recently, including in states hit by the flareups, such as California and Texas, Pantheon Macroeconomics wrote in a note to clients.
Unemployment claims remain historically high as the nation struggles to recover from the coronavirus pandemic. (Photo: USA TODAY file photo)
Yet layoffs and initial claims can lag the course of the virus and business openings or closings. Last week, initial claims rose by about 18,000 in California, 9,600 in Texas and 7,200 in Louisiana. Meanwhile, claims fell by 9,000 in Florida, 5,600 in Michigan and 7,500 in Kentucky.
Last week’s totals likely were also inflated by Hurricane Laura in Louisiana and by the California wildfires, says economist Daniel Zhao of Glassdoor, the job posting site.
Also, many restaurants, shops and other businesses are still laying off workers – in many cases, for a second time – as they exhaust federal loans that were forgivable as long as they kept or rehired employees. Having met the loan terms, some firms are chopping jobs anew as they continue to struggle with capacity limits or consumer fears of contagion.
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Congress, meanwhile, has remained deadlocked over a stimulus package that would provide fresh funding for struggling businesses and extend a $600 federal weekly supplement to state jobless benefits that expired July 31. Republicans this week proposed reducing the $600 bonus to $300 and financing only firms that can show at least 35% drop in revenue versus last year, but Democrats rejected the measure.
An additional 839,000 people filed initial claims last week under a separate program that expands eligibility to the self-employed and independent contractors, among others, during the crisis. About 14.6 million Americans were already receiving benefits under that program, known as Pandemic Unemployment Assistance.
Last week, USA TODAY began using non-seasonally adjusted jobless claims numbers because the Labor Department switched to a different method to adjust the data to account for seasonal factors. The change sharply reduced the seasonally adjusted figure and made it difficult to compare to prior weeks, when the totals hovered at about 1 million.
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