New Unemployment Claims Unexpectedly Rise Again As Fed Cautions Job Market Recovery ‘May Take A Longer Time’ - Forbes

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Topline

New jobless claims rose unexpectedly for a second time in a row last week in yet another sign that the broader economy may struggle more than anticipated as the United States tries to contain the recent surge in Covid-19 cases.

Key Facts

About 351,000 people filed initial jobless claims in the week ending September 18, up 16,000 from the previous week, according to the weekly data released Thursday.

Economists were only expecting about 320,000 new claims, according to Bloomberg; the reading hit a pandemic low of 312,000 in the week ending September 4.

The number of people filing continuing claims also creeped up to about 2.8 million—131,000 more than the previous week.

According to the Labor Department, there are still 8.4 million unemployed people in the United States, markedly higher than the 4 million in February 2020.

Crucial Quote

“Hoped-for progress on new claims was not in this latest snapshot,” Bankrate analyst Mark Hamrick said Thursday, pointing to significant jumps in claims coming from California and Virginia, as well as Louisiana on the heels of Hurricane Ida. “Further progress on the unemployment rate may not be as promising this year as earlier hoped, largely as the delta variant pushes some economic activity into the future,” he added.

Tangent

In a Wednesday press conference, Federal Reserve Chair Jerome Powell lamented the labor market’s slow recovery. “It still seems that inexorably . . . people who were largely working back in February 2020 [will] get back to work when it’s time to do that; it just may take a longer time,” Powell said, blaming the spread of Covid-19's delta variant for a shortfall in jobs, particularly in the travel and leisure industries. On Wednesday, the Fed said unemployment could remain above prepandemic levels until 2023. The unemployment rate clocked in at about 5.2% of the labor market in August, according to the Labor Department’s monthly jobs report, down from 5.4% in July and significantly higher than pre-pandemic levels below 4%.

Key Background

A number of data points in recent weeks have pointed to ongoing struggles around employment. The labor market posted its worst monthly showing since January last month, adding back only 235,000 jobs despite forecasts calling for nearly a million additions. “The delta variant of Covid-19 appears to have dented the job market recovery,” Mark Zandi, the chief economist of Moody’s Analytics, said of the lackluster employment readings, echoing Powell and other experts concerned the pandemic’s resurgence has started to curtail the economic recovery. New claims also came in higher than expected last week, when another 335,000 Americans filed for first-time benefits. Meanwhile, an estimated 7.5 million Americans stopped receiving jobless benefits as a result of the federal government's pandemic-era unemployment relief expiring this month, according to Bank of America, while another 3 million people saw their unemployment checks cut by $300 a week—marking the largest cutoff of U.S. unemployment benefits in history.