WASHINGTON: The novel coronavirus crisis continues to pummel the US labour market, with the number of Americans filing for unemployment benefits falling less than expected last week, suggesting a second wave of layoffs in industries and jobs not initially impacted by business closures caused by the pandemic.
The Labour Department’s weekly jobless claims report yesterday, the most timely data on the economy’s health, supports economists’ contention that it would take a while for activity to rebound even as businesses in many states reopen after shuttering in mid-March as authorities tried to slow the spread of Covid-19.
Federal Reserve chair Jerome Powell on Wednesday warned of an “extended period” of weak growth and stagnant incomes. The economy lost a staggering 20.5 million jobs in April, the steepest plunge in payrolls since the Great Depression of the 1930s. Economic output dropped in the first quarter at its sharpest rate since the 2007-09 Great Recession.
“Unemployment claims still show continuing devastation for American families,” said Robert Frick, corporate economist at Navy Federal Credit Union. “The predicted ‘second wave’ of layoffs may have started. This is more layoffs building on the initial layoffs, as middle management and those in support industries lose their jobs.”
Initial claims for state unemployment benefits totalled a seasonally adjusted 2.981m for the week ended May 9, the government said. While that was down from 3.176m in the prior week and marked the sixth straight weekly drop, claims remain astoundingly high.
Economists had forecast applications for unemployment benefits totalling 2.5m in the latest week. Claims have been gradually decreasing since hitting a record 6.867m in the week ended March 28.
In addition to weak demand causing layoffs in industries and jobs not initially affected by the coronavirus shutdowns, the processing of application backlogs, which accumulated as state unemployment offices were overwhelmed by the unprecedented wave of applications, was keeping claims elevated, economists said.
They said some workers were likely filing more than one claim.
States continue to report layoffs in the accommodation and food services, healthcare and social assistance industries among other. They are also reporting redundancies in the professional, scientific, technical services and education industries.
The latest numbers lifted to 36.5m the number of people who have filed claims for unemployment benefits since mid-March, or more than one in five workers losing their job. Claims will be closely watched in the coming weeks for signs whether companies rehire workers as businesses reopen.
Though many parts of the country are reopening, businesses and factories are operating well below capacity. Unadjusted claims for Florida and Georgia, which have led the easing of restrictions on businesses, increased last week.
While some businesses have accessed loans from an almost $3 trillion fiscal package, which could be partially forgiven if they use the credit for employee salaries, many small enterprises are expected to close permanently, leaving some of the 21.4m people who lost their jobs in March and April out of work for a long time.
Yesterday’s claims report also showed the number of people receiving benefits after an initial week of aid increased only 456,000 to a record 22.833m for the week ending May 2.
Economists believe April marked the trough in job losses and expect May payrolls to drop at least 15m.
The Labour Department also reported that 3.4m people had their applications for Pandemic Unemployment Assistance processed in the week ending April 25.
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