A closely watched gauge of layoffs across the U.S. held steady at a historically high level last week, pushing the total during the coronavirus-induced economic crisis to a mind-boggling 51.3 million.
About 1.3 million Americans filed applications for unemployment insurance for the first time, the Labor Department said Thursday. Economists surveyed by Bloomberg estimated that 1.25 million people filed initial claims.
The 1.3 million total marks the 15th straight weekly decline after first-time claims peaked at 6.9 million at the end of March, but it’s the smallest drop yet, at just 10,000. That could reflect the spike in coronavirus cases across much of the country, particularly the South and West, and decisions by more than 20 states to pause or reverse the reopening of restaurants, bars, gyms, movie theaters and other outlets. The rollbacks may spark a new wave of layoffs, especially in hard-hit states like Texas, Florida, Arizona and California, and possibly even push the claims totals higher.
“Next week could easily see an increase” in initial claims, economist Ian Shepherdson of Pantheon Macroeconomics wrote in a research note.
Last week, initial claims rose by 62,000 in Florida, nearly doubling the prior week’s total.
Another factor that may be triggering layoffs is that many businesses are exhausting the forgivable federal loans they received as long as they retained or rehired staffers, says Rubeela Farooqi, chief U.S. economist of High Frequency Economics. Some that are struggling could let workers go.
“Conditions in the labor market remain weak and the risk of mounting permanent job losses is high, especially if activity continues to be disrupted by repeated virus-related shutdowns,” Farooqi wrote in a note to clients.
Continuing jobless claims, which represent all Americans still receiving benefits with a one-week lag, totaled 17.4 million, down from 17.8 million the prior week. That number also has been gradually trending down but remains elevated and is becoming more significant because it reflects all those still unemployed and accounts for people who have returned to work.
That tally could be staying high in part because the federal government has been providing a $600 weekly supplement to state benefits, prompting some Americans to stay on unemployment rather than take a new job, economists say. But that bonus is set to expire at the end of the month unless Congress renews it, possibly at a reduced level.
Continuing claims also have been volatile because of California and Florida, which require the unemployed to file for benefits every two weeks.
An additional 928,000 people filed initial claims under a separate program that expands eligibility to the self-employed and independent contractors, among others, during the crisis. About 14 million Americans were already receiving unemployment checks under that program, known as Pandemic Unemployment Assistance.
Last week, initial claims fell by 14,000 in Maryland, 11,000 Texas and 10,000 in New Jersey. But, besides the 62,000 increase in Florida, claims also rose by 23,000 in California and 12,000 in Washington State.
Economists are puzzling over why both initial and continuing claims have remained elevated even as the economy added a net 7.5 million jobs – including new hires and layoffs – in May and June after shedding 22 million the prior two months. The totals during the coronavirus crisis are far higher than the previous all-time high of 695,000 claims during a deep recession in October 1982.
One answer is that even though layoffs have continued, the figure has been far outpaced by the number of unemployed Americans who have been rehired as the economy reopens, Barclays wrote in a note to clients.
The claims figures also may partly reflect large backlogs as states struggled in the early days of the crisis to cope with an unprecedented flood that swamped their phone and computer systems, Barclays says.
The claims count also include more than just layoffs. The federal government has expanded eligibility criteria for unemployment insurance during the crisis, allowing workers who have been furloughed or are experiencing reduced hours to receive benefits.
The latest claims totals will figure into the July employment report. Economists had been expecting additional job gains in July but the infection spikes and reversals of some state reopenings puts that forecast at risk.