Ten months after the coronavirus crisis sent the labor market down, the emerging pandemic continues to send shockwaves through the US economy.
Although more than half of the 22 million jobs lost last year were recovered, a new upsurge of infections led to shutdowns and retrenchments that hit the leisure and hospitality industry in particular, which had a setback for recovery. has.
The latest evidence came on Thursday when the Labor Department reported that initial claims for state unemployment benefits had risen sharply last week, exceeding one million for the first time since July.
Just days earlier, the government had announced that employers had laid off 140,000 jobs in December, the first net decline in jobs since last spring, with restaurants, bars and hotels suffering heavy losses.
“We are in a deep economic hole and digging in the wrong direction,” said Daniel Zhao, senior economist at career website Glassdoor. “The report obviously shows that the increase in claims is worse than expected, and that there is reason to think that things are going to get worse before they get better.”
This is all the more worrying because a key part of President Trump’s aid package signed last month – a weekly federal supplement of $ 300 to other unemployment benefits – will be in mid-March.
Elected President Joseph R. Biden jr. Said he would push a new stimulus package through Congress to give workers and employers a lifeline until the pandemic can be brought under control. His plan will include direct payments to most households, as well as assistance to small businesses and local and state governments.
The recent economic data has brought such efforts to a new sense of urgency, with millions struggling to make ends meet, although more job losses may be in the offing.
The Department of Labor said Thursday that 1.15 million workers had filed initial claims for state unemployment benefits during the first full week of the new year. A further 284,000 claims have been filed for Pandemic Unemployment Assistance, a federal emergency program for freelancers, part-time workers and others who are not normally eligible for unemployment benefits. No figure is seasonally adjusted. On a seasonally adjusted basis, new government claims amounted to 965,000.
Before the pandemic, the weekly submission usually amounted to about 200,000.
The holiday may have held off unemployment claims in previous weeks, and people waited until the new year to file claims. However, several economists have expressed skepticism that the submission of delays last week was a major factor in the increase in claims.
“I think there’s no doubt that unusual things can happen on the margin side,” said Mark Hamrick, senior economic analyst at Bankrate.com. ‘But we must also keep in mind that these are not our grandfather’s unemployment limits, which means that a lot of this is done digitally. I think if one is just trying to understand the human nature, it does not make sense for someone to postpone a request for financial aid if they are unemployed. ‘
Economists are likely to believe that the $ 300 federal supplement will increase the demand for benefits.
Confusion over the new federal aid – which Mr. Trump spent several days threatening not to sign – possibly also temporarily delaying claims for Pandemic Unemployment Assistance, which ended during the week ending Jan. 2. The increase last week has seen the numbers more money line up with the previous increased levels.
Even with the new federal aid for the unemployed in last month’s legislation, there is ongoing concern about processing payments – a task passed on to states – to problems with the initial round of emergency benefits last spring.
“States are now extra careful to get as much guidance as possible,” said Michele Evermore, a senior policy analyst at the National Employment Law Project, a nonprofit organization. But she said some states, including New York, were better equipped to move quickly this time around and take a “ask questions later” approach.
She said she expects by next week most states will have an important part of their program, if not all of the components.
In addition to the $ 300 weekly supplement and the short-term renewal of benefits for gig workers and the self-employed, the latest round of federal aid renewed Pandemic Emergency Unemployment Compensation, a program for those whose state benefits run out.
The diverse nature of state unemployment programs, some of which offer benefits in less than 12 weeks in normal times, has made it a target for Democrats. Mr. Biden has vowed to ensure Americans can get their unemployment insurance “on time and in full,” and Sen. Ron Wyden, an Oregon Democrat and incoming chairman of the Senate Financing Committee, said he would push for a review of the nation’s unemployment benefit system.
Among the provisions supported by some Democrats is an automatic renewal of federal unemployment benefits and other assistance until the unemployment rate drops to a certain level. This will alleviate the need for repeated congressional actions in times of crisis.
Meanwhile, if the coronavirus hits the service sector, employers are likely to get more jobs in the coming weeks. Some struggling businesses cannot survive.
“When I look at the situation of the pandemic and the health situation, people are still afraid of the virus, as it should be, and it is going to have an economic impact,” said AnnElizabeth Konkel, an economist at career website Indeed. . “The virus is the root of everything that is going on right now.”
Economists and analysts predict even better times, possibly as soon as spring. As more people are vaccinated, business will start to fall, which will ease the constraints on businesses and lead to a revival in consumer activities. With warmer weather, more people can congregate outside and slow down the spread of the virus, like last year. A new stimulus package could also alleviate the economic pain of the pandemic.
But even when the coronavirus is prevented, economists say an upswing will not happen overnight.
“As we enter the second quarter, the economy needs to start healing,” he said. Hamrick of Bankrate said. “But it clearly took everything longer than anyone expected, and the cure will probably take a while, too.”