Unemployment Claims Remain High as Millions Still Struggle to Find Work
More than nine months after the Covid-19 virus started spreading widely, the economy remains stuck in the state that characterized it for much of 2020. While many big businesses are prospering, the service economy is constrained by restrictions and a wariness to spend in many parts of the country.
Initial claims for unemployment benefits dropped modestly last week, the Labor Department reported Thursday, though they remained very high by historical standards at more than 800,000.
Hiring has slowed along with the rest of the economy, and some economists expect to see barely any growth in payrolls when data for December comes out next week.
The situation is most severe for lower-skilled workers. While the unemployment rate for college graduates stood at 4.2 percent in November, the rate was 7.7 percent for workers with just a high school diploma. The jobless rate for all Americans was 6.7 percent.
The Christmas holiday most likely affected filings because of the shortened workweek, a phenomenon that also occurred during Thanksgiving week. “They bounce up and down a lot during the holidays,” said Gus Faucher, chief economist at PNC Financial Services Group in Pittsburgh.
There were 841,000 new claims for state benefits, compared with 873,000 the previous week. Another 308,000 people filed for Pandemic Unemployment Assistance, a federally funded program for part-time workers, the self-employed and others ordinarily ineligible for jobless benefits.
“It’s still a very high number,” said Diane Swonk, chief economist at Grant Thornton, an accounting firm in Chicago. “The signals aren’t exactly favorable.”
The weakness underscores the need for the pandemic relief bill President Trump signed into law on Sunday, she added. But uncertainty over the package’s fate last week, plus the holiday, may have temporarily depressed claims. It will take months for the new legislation’s full impact to be felt, and most economists expect the rate of layoffs to remain high.
Still, economists say the $900 billion aid package could mean the difference between some economic expansion in the first quarter and no growth at all.
To many people, the economy will not noticeably improve for several months at least. Ms. Swonk expects hiring to have been unchanged or decline in December from November.
“The overall labor market is losing momentum at a critical juncture as cases soar,” she said.
On a seasonally adjusted basis, the number of new state claims was 787,000, a decrease from 806,000 in the previous week.
The economic relief package will issue payments of $600 and distribute a federal unemployment benefit of $300 for at least 10 weeks. Find more about the measure and what’s in it for you. For details on how to get assistance, check out our Hub for Help.
- Will I receive another stimulus payment? Individual adults with adjusted gross income on their 2019 tax returns of up to $75,000 a year will receive a $600 payment, and a couple (or someone whose spouse died in 2020) earning up to $150,000 a year will get twice that amount. There is also a $600 payment for each child for families who meet those income requirements. People who file taxes using the head of household status and make up to $112,500 also get $600, plus the additional amount for children. People with incomes just above these levels will receive a partial payment that declines by $5 for every $100 in income.
- When might my payment arrive? The Treasury Department said on Dec. 29 that it had started making direct deposit payments, and would begin to mail checks the next day. But it will be a while before all eligible people receive their money.
- Does the agreement affect unemployment insurance? Lawmakers agreed to extend the amount of time that people can collect unemployment benefits and restart an extra federal benefit that is provided on top of the usual state benefit. But instead of $600 a week, it would be $300. That will last through March 14.
- I am behind on my rent or expect to be soon. Will I receive any relief? The agreement will provide $25 billion to be distributed through state and local governments to help renters who have fallen behind. To receive assistance, households will have to meet several conditions: Household income (for 2020) cannot exceed more than 80 percent of the area median income; at least one household member must be at risk of homelessness or housing instability; and individuals must qualify for unemployment benefits or have experienced financial hardship — directly or indirectly — because of the pandemic. The agreement said assistance will be prioritized for families with lower incomes and that have been unemployed for three months or more.
Stricter state and local restrictions on restaurants and other businesses will weigh heavily on the job market in the weeks ahead, said Scott Anderson, chief economist at Bank of the West in San Francisco.
Mr. Anderson expects that the monthly jobs report will show that the unemployment rate rose to 6.9 percent in December, from 6.7 percent in November. The unemployment rate has fallen sharply since peaking at 14.7 percent in April, but hiring has slowed as the economy has faltered in recent months.
The economy may have gained only about 20,000 jobs in December, said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. That would amount to a “huge deceleration from last month,” she added, when payrolls jumped by 245,000.
What’s more, the pace of layoffs has been persistently high, as industries like dining, travel and entertainment struggle because the pandemic is keeping many people at home even in states and cities that have not placed many restrictions on businesses. By contrast, many white-collar workers who have been able to work remotely have emerged from the economic turbulence relatively unscathed.
The introduction of vaccines is a bright spot, as are positive economic signs, like surging stock prices and a booming housing market. But it will be months before enough Americans can be inoculated to allow people to go to restaurants, events and movie theaters without fear of being infected.
“The trend is not good with the additional closures implemented around the country,” said Carl Tannenbaum, chief economist at Northern Trust in Chicago.