WASHINGTON (Reuters) – The number of Americans filing for unemployment fell to almost four months low last week, but a record 32.9 million people received unemployment checks in the third week of June, which confirms expectations of the labor market before years recover from the COVID-19 pandemic.
Economists warned against over-reading the larger-than-expected decline in unemployment claims reported by the Labor Department on Thursday, noting that the period included independence day on July 4. Claims data is volatile during the holidays.
Large parts of the country, including densely populated states like Florida, Texas and California, are experiencing record peaks in new cases of coronavirus, which has forced authorities to reduce or suspend business reopening and send some workers home. Bankruptcies are increasing in a context of weak demand and companies have exhausted public loans, which has enabled them to keep employees on their payroll.
“Don’t be fooled, the economic issues are not over yet, not by far,” said Chris Rupkey, chief economist at MUFG in New York. “For the labor market, it is not the second wave that suspends jobs, it is the fears of the second wave and even a third that slow the economy and make the road to recovery even longer. ”
Initial claims for state unemployment benefits fell 99,000 to 1.314 million seasonally adjusted for the week ended July 4. The 14th consecutive weekly decline pushed demand to its lowest level since mid-March, when non-essential businesses were closed to slow the spread of respiratory disease.
Claims reached a historic high of 6.867 million in late March. They remain about double their highest point during the great recession of 2007-2009. Economists polled by Reuters had forecast 1.375 million claims last week.
Including a government-funded program, 2.4 million people filed claims last week. There has been a sharp drop in unemployment insurance claims in Georgia, California and Florida, despite the resurgence of coronavirus infections. Texas, however, has reported an increase in deposits.
Stocks on Wall Street were lower. The dollar appreciated slightly against a basket of currencies. The prices of the US Treasury have gone up.
INCREASE IN UNCERTAINTY
The number of people receiving benefits after the first week of assistance fell from 698,000 to 18,062 million in the week ending June 27. These so-called continuous requests, which are reported one week late, reached a record 24.912 million in early May.
Economists attribute the decrease in ongoing claims to the government’s paycheck protection program, which provides businesses with loans that can be partially canceled if used for wages. Re-hiring workers in establishments such as restaurants, bars, gyms and dental offices is also helpful.
The government announced last week that 4.8 million jobs had been created in June, the most since the start of record keeping in 1939.
But the boost to the P3 program is fading, even though the government has extended the deadline until August 8 so that small businesses can apply for loans. An NFIB poll last week found that some small business owners were cutting their payroll, noting that “many owners received their loans in April and will not be able to keep all of their workers after June.”
The economy went into recession in February. From retailers to airlines, businesses have announced layoffs and holidays. Large retailers like Brooks Brothers, JC Penney, J. Crew and Neiman Marcus have filed for bankruptcy.
“When the country experienced the first wave of the pandemic at the start of this year, the majority of business bankruptcies were small businesses that could not afford the initial shock,” said Bill Greiner, chief economist at Mariner Wealth. Consultants in Leawood, Kansas.
“Now we are witnessing an acceleration of the bankruptcy of large companies. With falling oil prices and global demand for oil tightening, more oil bankruptcy is expected. ”
In the third week of June, 32.9 million people received unemployment checks from all programs, up 1.411 million from the middle of the month. Economists say this number, which is reported with a two-week lag, provides a more accurate picture of the labor market. Initial and continuous claims data only cover state unemployment programs.
The government has expanded eligibility for unemployment benefits to include the self-employed and entrepreneurs, among other workers who did not qualify for unemployment insurance. He also offered an additional $ 600 per week in unemployment benefits to cushion the economic hardship caused by the pandemic.
This added benefit expires on July 31 and one economist warned that it could undermine the nascent economic recovery.
“We have entered a period of growing uncertainty about the state of the recovery and businesses are not stupid,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania. “Faced with the inability to forecast future demand, the best thing to do is to hire prudently, if at all, or allow an organic drop in the wage bill.”