US jobless claims dip but show recovery has long way to go

NEW YORK: Fewer Americans sought unemployment benefits last week, but the modest drop did little to dispel concerns that the US job market and wider economy face an arduous recovery from the devastation inflicted by the coronavirus pandemic in 2020.

The final major economic data point for a year that saw a recession of historic magnitude erupt out of nowhere stood as a fitting reminder for both how far the recovery has progressed and how much more it has to go.

While new claims for benefits reported by the US Labour Department on Thursday dropped for the second week in a row to a seasonally adjusted 787,000 in the week ended Dec. 26 from 806,000 a week before, it left them at roughly the level they were three months ago and with little indication they would show material improvement any time soon.

The arrival of effective Covid-19 vaccines and additional federal pandemic aid have set the stage for a brighter 2021. But economists agree the still-raging epidemic and the fractured government response to it means more difficult months ahead before improvement takes hold.

The report also showed that as of mid-December, more than 19.5 million people were receiving some form of jobless aid, including from emergency measures extended by the latest coronavirus aid bill that was passed by Congress and signed by President Donald Trump. Those emergency programs now account for roughly two-thirds of all ongoing jobless assistance.

As of Dec. 19, the number of people continuing to draw benefits under regular state unemployment insurance programs declined to 5.219 million, the lowest since March, from 5.322 million the week before. Economists took little solace from that decline, however, seeing it more the result of people exhausting benefits rather than finding new work.

The elevated level of claims aligns with other recent weak economic reports, including a decline in consumer confidence to a four-month low in December and drops in both consumer spending and income last month.

With persistently high Covid-19 infection levels forcing renewed restrictions on businesses and consumer activity around the country, some economists now see a chance that overall US employment has fallen this month for the first time since April, when 20.8 million people lost jobs in a single month.

While payrolls have risen each month since then, the total level of employment remains roughly 10 million jobs below its pre-pandemic level.

The latest report’s end date - Dec. 26 - was when as many as 14 million people were set to lose jobless benefits provided by a $3 trillion pandemic relief bill enacted in the spring. That was a cliff that lawmakers had raced to avoid by passing a nearly $900 billion supplemental package in the days before Christmas, including $600 payments to most individuals and extensions of unemployment benefits and eviction moratoriums.