WASHINGTON: The number of Americans seeking jobless benefits fell last week, but millions laid off because of Covid-19 continue to receive unemployment checks, suggesting the labour market could take years to heal from the pandemic even as hiring resumes.
The weekly jobless claims report from the Labour Department on Thursday, the most timely data on the economy's health, followed news last Friday of a surprise 2.5 million increase in nonfarm payrolls in May. It reinforced views that the worst of the labour market turbulence was behind.
The Federal Reserve signalled on Wednesday it would provide years of extraordinary support for the economy, with Fed Chair Jerome Powell cautioning there would an "extended period" where it is going to be "difficult for many people to find work."
"The economy won't be fully recovered until the labour markets say everyone has got their jobs and paychecks back to help the country spend its way to sustainable prosperity," said Chris Rupkey, chief economist at MUFG in New York.
Initial claims for state unemployment benefits fell 355,000 to a seasonally adjusted 1.542 million for the week ended June 6. The 10th straight weekly decline pulled claims further away from a record 6.867 million in late March. Still, claims are more than double their peak during the 2007-09 Great Recession.
Economists polled by Reuters had forecast 1.55 million new claims in the latest week.
The National Bureau of Economic Research, the arbiter of US recessions, declared on Monday that the economy slipped into recession in February.
Though the number of people staying on benefits is abating, the ranks of the unemployment are still uncomfortably large. The number of people receiving benefits after an initial week of aid fell 339,000 to 20.929 million for the week ended May 30. The so-called continued claims, which are reported with a one-week lag, dropped from a record high of 24.912 million in early May.
A separate report from the Labour Department on Thursday showed the producer price index for final demand rebounded 0.4% last month after plunging 1.3% in April. Producer prices were driven by a 40.4% surge in the cost of meat amid shortages because of Covid-19 outbreaks at processing plants.
Though the underlying trend in producer inflation remains subdued, in line with an economy that is in recession, pricey food could further burden consumers at a time when households are grappling with severe unemployment.
Large meat plants across the United States are closed or running at reduced capacity.
Economists attributed the decline in continuing claims to the government's Paycheck Protection Program, part of a historic fiscal package worth nearly $3 trillion, offering businesses loans that can be partially forgiven if used for employee wages.