NEW YORK – Just over 1 million Americans filed new claims for state jobless benefits last week, the latest sign that the US economy is losing momentum just as federal aid to the unemployed has been pulled away.
Weekly claims briefly dipped below the 1 million mark earlier this month, offering a glimmer of hope in an otherwise gloomy job market. But filings jumped to 1.1 million the next week and stayed above 1 million last week, the Labor Department said on Thursday (Aug 27).
Another 608,000 people filed for benefits under the federal Pandemic Unemployment Assistance program, which offers aid to independent contractors, self-employed workers and others not covered by regular state programs. That number, unlike the figures for state claims, is not seasonally adjusted.
Other recent indicators also suggest that the recovery is faltering. Job growth slowed in July, and real-time data from private-sector sources suggests that hiring has slumped further in August. On Tuesday, American Airlines said it would furlough 19,000 workers on Oct 1, the latest in a string of such announcements from major corporations.
“It is worrying because it does signal that these large companies are pessimistic about the state of the recovery and don’t think that we are going to be returning to normal anytime soon,” said Daniel Zhao, senior economist at career site Glassdoor.
Unemployment filings have fallen sharply since early April, when 6.6 million applied for benefits in a single week. But even after that decline, weekly filings far exceed any previous period. Close to 30 million Americans are receiving benefits under various state and federal programs.
The rate of job losses remains high as government support for the unemployed is waning. A US$600-a-week federal supplement to state unemployment benefits expired at the end of July, and efforts to replace it have stalled in Congress. US President Donald Trump announced this month that he was using his executive authority to give jobless workers an additional US$300 or US$400 a week, but few states have begun paying out the new benefit.
Economists warn that the loss of federal support could act as a brake on the recovery. Nancy Vanden Houten, lead economist for the forecasting firm Oxford Economics, estimated that the lapse in extra unemployment benefits would reduce household income by US$45 billion in August. That could lead to a drop in consumer spending and further layoffs, she said.
The benefit initiated by Trump would use federal emergency funds to provide US$300 a week in extra payments to most unemployed workers. (States can choose to chip in an additional US$100 a week, but few are doing so.) As of Wednesday, 34 states had been approved for grants under the programme, known as Lost Wages Assistance.
Arizona, the first state to turn the grants into payments, sent US$252.6 million to about 400,000 recipients last week, a sum that included retroactive payments for the first two weeks of August. Texas this week has paid out US$424 million and expects to deliver nearly US$1 billion more to cover the first three weeks of benefits. A handful of other states are paying benefits or expect to begin doing so within days.
Most, however, said it could take until mid-September or later.
Once the money starts flowing, it may not last long. Mr Trump’s order authorized spending up to US$44 billion, which federal officials said last week would cover four or five weeks of payments. That means jobless workers in many states may receive a lump sum covering several weeks of retroactive benefits, but nothing more without congressional action.