Applications for U.S. unemployment benefits unexpectedly fell last week to the lowest since March, offering a ray of hope for an economy still battered by the pandemic.
Initial jobless claims in regular state programs fell by 249,000 to 1.19 million in the week ended Aug. 1, Labor Department data showed Thursday. That was the largest improvement in almost two months.
Continuing claims — the total number of Americans claiming ongoing unemployment benefits in those programs — decreased to 16.1 million in the week ended July 25, the lowest since April.
Even with the drop, initial claims were more than five times pre-crisis levels. Analysts have cautioned that it could take some time to confirm a sustainable trend in improvement — especially if the expiration of the weekly $600 in federal benefits discouraged some from filing claims.
With cumulative job losses numbering in the tens of millions, it will take not just steady improvement in the number of weekly claims, but also in hiring, for the labor market to rebound to any semblance of its pre-pandemic state.
“A combination of uncertainty from rising virus cases to the withdrawal of financial support is concerning for an already fragile recovery,” said Daniel Zhao, senior economist at jobs website Glassdoor.
“The economy is still in deep risk of falling sideways — where conditions improve so sluggishly that the effects of the crisis become increasingly permanent,” Zhao explained.
The labor market had been showing signs of stalling in recent weeks as a resurgence in virus cases, beginning in mid-June, led a slew of states to halt or even reverse reopenings.
That surge has begun to ebb, potentially supporting hiring, but the outlook could deteriorate once again as businesses exhaust funds from the Paycheck Protection Program.
Meanwhile, the extra $600 in weekly jobless benefits that have helped keep incomes and spending afloat in recent months has expired, threatening the fragile economic rebound.
Lawmakers and the White House are struggling to agree on a new stimulus package that would once again bolster the size of millions of Americans’ unemployment checks, but even with a deal, it could take several weeks for the unemployed to actually see that money.
Such a gap would further strain families who have depleted their savings and are unsure on how they will afford their next rent payment.
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“It will take several weeks to judge whether this is the start of a renewed trend toward improvement, or a blip within the current pattern of slowing job-market recovery. Layoffs remain well above even the Great Recession high, threatening the overall outlook,” said Eliza Winger.