New applications for unemployment benefits dipped slightly to 1 million last week, the Department of Labor reported Thursday, right in line with forecasters’ expectations.
Jobless claims, a proxy for layoffs, have been hovering near the 1 million mark in recent weeks. That rate is much less than the 7 million claims in one week in late March, but still far higher than the rate seen before the pandemic hit, which was around the low-200,000s.
The Labor Department said that an additional 607,806 workers filed for benefits through the Pandemic Unemployment Assistance, created by Congress as part of the March CARES Act relief bill to provide aid to people facing losses of work because of the pandemic, such as gig workers who’d lost customers.
The economy cannot afford to lose a million jobs a week and still return quickly to the pre-pandemic normal.
“The risk of permanent damage to the labor market remains high, which will slow the pace of recovery,” noted Rubeela Farooqi, the chief U.S. economist for the forecasting firm High Frequency Economics. “The return to pre-pandemic levels of prosperity is set to be an uncertain and prolonged process.”
Total employment is down about 13 million since February, and unemployment is above 10%, even after record job growth in recent months. In other words, although the jobs recovery has been strong, it hasn’t been nearly strong enough to erase the extreme losses.
The fate of the recovery in large part depends on whether the millions of unemployed workers return to their old jobs or whether they need to find new jobs and, in that case, how quickly they can find them.
Through the early summer, households were kept afloat by government aid, especially in the form of the $600-a-week boost to unemployment benefits enacted in the CARES Act. That benefit expired in late July. Negotiations to extend the boost in one form or another have stalled out.
Democrats have sought to re-up the benefits at $600-a-week through the end of the year, arguing that giving unemployed workers cash will help prop up spending and allow people not to avoid work situations that would increase the risk of contracting the coronavirus.
Republicans, though, have sought to lower the amount, noting that the boost made unemployment pay more than work for many people. They have said they want to encourage workers to return to jobs. President Trump has sought, through executive action, to extend the benefit at a rate of, effectively, $300 a week, although a little more than half of states are pursuing the arrangement.
A major obstacle to a faster return to work is that surges in COVID-19 cases over the summer, especially across Sun Belt states, have led more people to stay home and forced shutdowns of bars, restaurants, gyms, and other businesses.
“It will take many weeks of gradual improvement for the economy to free itself from coronavirus’s turmoil,” said Indeed Hiring Lab economist AnnElizabeth Konkel. “But until the virus is tamed, a return to the blockbuster labor market of the pre-COVID era remains out of reach.”
