Rise in US jobless claims clouds labour market recovery

NEW YORK: The number of Americans filing a new claim for unemployment benefits rose unexpectedly back above the 1 million mark last week, a setback for a struggling US job market crippled by the coronavirus pandemic. Still, in a sign some rehiring is underway, the rolls of those continuing to receive jobless benefits is slowly declining, the Labour Department reported on Thursday, and other data indicated a recovery from the recession triggered by Covid-19 continues, though at a more fitful pace than earlier.

Initial claims for state unemployment benefits rose to a seasonally adjusted 1.106 million for the week ended Aug. 15, from an upwardly revised 971,000 in the prior week. Economists polled by Reuters had forecast 925,000 applications in the latest week.

The previous week's level had marked the first time since March that new claims had registered below 1 million, and had fuelled some optimism that the pace of layoffs would slow further. Last week's reversal soured that, and new weekly claims have been above the 1 million mark for 21 of the last 22 weeks.

The volatility in benefits activity follows the lapse of an extra $600 weekly unemployment benefit at the end of July. The enhanced benefit had been in place since the spring under the massive coronavirus stimulus package passed by Congress in late March, but Democrats in Congress and the White House have failed to reach agreement on extending it.

While President Donald Trump has signed an executive order that includes a provision extending the supplement at a reduced rate of $400 a week, there has been confusion over its implementation.

States are required to cover $100 of the benefits, but many governors have indicated they don't have the financial capacity after revenues were decimated in the fight against the Covid-19 pandemic. The remaining $300 will be funded from a limited emergency disaster relief program, which economists estimated could be depleted as early as September.

First-time claims peaked at a record 6.867 million in late March. While new claims are up, the number of people continuing to collect jobless benefits beyond the first week fell to the lowest level since April. So-called continuing claims declined to 14.844 million in the week ending Aug. 8 from a revised 15.480 million in the prior week. Economists polled by Reuters had forecast continued claims at 15 million.

Nonetheless, two other reports on Thursday showed a recovery is underway, although the pace has slackened in recent weeks. The Philadelphia Federal Reserve's manufacturing index showed the pace of activity growth in the mid-Atlantic region slowed for a second straight month in August.