US labour market recovery stalling; trade deficit widens sharply

WASHINGTON: The number of Americans filing first-time claims for jobless benefits unexpectedly dipped last week while staying extremely high, with the labour market recovery appearing to stall as a raging COVID-19 pandemic threatens to overwhelm the country.

Other data on Thursday showed layoffs announced by US companies surged 18.9% in December. Still, the economy is unlikely to slide back into recession after the government approved additional pandemic relief in late December.

More fiscal stimulus is likely. Democrats on Wednesday completed a sweep of the two Senate seats up for grabs in runoff elections in Georgia, giving the party control of the chamber and boosting the prospects for President-elect Joe Biden’s legislative agenda. Congress on Thursday formally certified Biden’s election victory hours after hundreds of President Donald Trump’s supporters stormed the US Capitol.

“Given that coronavirus caseloads remain extremely high and are set to increase in the near term due to holiday travel and parties, the labor market will remain soft over the next few months,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania.

Initial claims for state unemployment benefits dipped 3,000 to a seasonally adjusted 787,000 for the week ended Jan. 2, compared to 790,000 in the prior week, the Labor Department said. Economists polled by Reuters had forecast 800,000 applications in the latest week.

Claims were likely held down by difficulties adjusting the data for seasonal fluctuations around this time of the year. Unadjusted claims jumped 77,400 to 922,072 last week. Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs, 1.08 million people filed claims last week.

Elevated claims are in line with other data that have suggested the economy was taking a beating from business restrictions and retrenchment in consumer spending because of the pandemic. Minutes of the Federal Reserve’s Dec. 15-16 meeting published on Wednesday showed policymakers expected soaring coronavirus cases “would be particularly challenging for the labour market in coming months.”

COVID-19 cases in the United States have jumped to more than 21 million, with the death toll exceeding 356,000 since the virus first emerged in China in late 2019, according to the US Centers for Disease Control and Prevention.

In a separate report on Thursday, global outplacement firm Challenger, Gray & Christmas said US companied announced 77,030 job cuts in December, up from 64,797 in November. That brought total layoffs in 2020 to a record 2.305 million, a 289% surge compared to 2019. Nearly half of the job cuts were due to the pandemic.

The government is scheduled to publish its closely followed employment report for December on Friday. According to a Reuters survey of economists, nonfarm payrolls likely increased by 71,000 jobs after rising by 245,000 in November.

That would be the smallest gain since the jobs recovery started in May and mean the economy recouped about 12.5 million of the 22.2 million jobs lost in March and April.

Jobless claims are above their 665,000 peak during the 2007-09 Great Recession, though they have dropped from a record 6.867 million in March. The government in late December approved nearly $900 billion in additional fiscal stimulus, including the renewal of a $300 unemployment supplement until March 14.