New jobless claims unexpectedly rose for a second straight week, underscoring the strain to the labor market as rising COVID-19 cases set off another wave of stay-in-place restrictions that have begun to dampen business activity.
The Department of Labor released its weekly report on new jobless claims Thursday morning at 8:30 a.m. ET. Here were the main results in the report, compared to consensus estimates compiled by Bloomberg:
Initial jobless claims, week ended Dec. 12: 885,000 vs. 818,000 expected and a revised 862,000 during the prior week
Continuing claims, week ended Dec. 5: 5.508 million vs. 5.7 million expected and a revised 5.781 million during the prior week
Over the past month, record new COVID-19 case counts and hospitalizations gave way to new mobility restrictions across the country, weighing on employment. Some officials have warned of even more restrictions following the holiday season, as regions look to stem the unabated spread of COVID-19 with widespread vaccine distribution still months away.
These orders have already showed signs of unwinding some of the labor market’s recent strides toward recovery. This week’s report showed another week of new jobless claims coming in at more than 800,000, following a seven-week streak of new claims below that level. Initial jobless claims are about four times greater than their weekly average before the pandemic.
“The recent increase in case counts suggests the labor market could slip even further in the winter months, as hinted at by the latest jobless claims report,” JPMorgan economist Michael Feroli wrote in a recent note. “Even with a vaccine and possibly more fiscal stimulus on the horizon, by this time next year the labor market will likely fall short of anyone’s idea of full employment.”
States that have recently contended with major surges in new COVID-19 cases posted some of the largest increases in new claims last week. New claims rose by more than 35,000 in Illinois on an unadjusted basis, and by nearly 24,000 in California. In contrast, Texas’s new claims fell by nearly 12,000, and those in Georgia and Minnesota each fell by more than 9,000.
Continuing jobless claims, which are reported on a one-week lag, fell more than expected for the week ended December 5, after unexpectedly rising at the end of November for the first time since August. Consensus economists had expected an only slight drop in continuing claims last week, and mostly due to more workers exhausting regular state benefits and rolling onto longer-term federal unemployment programs.
But these federal programs are set to expire at the end of the month, unless Congress manages to enact another virus-relief bill before year-end to reauthorize these programs. More than 14 million Americans were claiming assistance as of last week under the Pandemic Emergency Unemployment Compensation and Pandemic Unemployment Assistance programs, both of which originated from Congress’s Coronavirus Aid, Relief, and Economic Security (CARES) Act in the spring.
“While the uptick [in new claims] is alarming in its own right, at center stage is the possibility of PUA and PEUC expiring. Without Congressional action, millions are set to lose unemployment benefits the day after Christmas,” Indeed Hiring Lab economist AnnElizabeth Konkel said in an email Thursday. “The unemployment benefits expiration may also kick off a more general downward spiral. Benefits for millions drying up overnight will likely pull consumption down, meaning businesses will see less revenue coming in. This hurts hiring and could mean further rounds of layoffs.”
As of Thursday morning, congressional lawmakers were closing in on a deal reportedly worth about $900 billion, which would include another round of stimulus checks to Americans as well as enhanced federal unemployment benefits. Though lawmakers have remained deadlocked over stimulus negotiations for months, traders and economists have become increasingly hopeful for a deal by year-end, given any coronavirus-relief measures would likely be included as part of the broader government spending package for the fiscal year due to be passed at the end of the week.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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