More than 3m Americans filed for first time unemployment benefits last week, taking the number of applications since the coronavirus lockdowns began seven weeks ago to 33.5m.
The number of initial jobless claims fell to almost 3.2m in the week ended May 2, the US labour department said on Thursday, down from 3.85m the previous week. Economists had predicted 3m. New claims, while still multiples of historic averages, dipped for the fifth consecutive week, showing some stabilisation from shocking peaks in early April.
The sum of people actually receiving benefits rose to 23m for the week ending April 25, and those receiving unemployment insurance comprised 15 per cent of all workers that week. The “insured unemployed” sometimes serves as an alternative measure of unemployment.
“The US labour market is in the worst position since the Great Depression and is unlikely to improve sustainably anytime soon,” Ronald Temple, head of US equity at Lazard Asset Management.
The latest data come ahead of Friday’s non-farm payroll report, which is expected to show that the US economy shed a record 21m jobs and the unemployment rate surged to 16 per cent in April.
“The recent data are consistent, we think, with a further 13m drop in May payrolls after the 22m plunge we expect to be reported tomorrow for April,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “But we’re very hopeful that June will see the beginnings of a rebound as states begin to reopen.”
A paper released on Tuesday by the San Francisco Fed pointed out that a return to the unemployment lows earlier this year “would require a pace of hiring activity that is much more rapid than recorded during any past recovery, which seems unlikely given the severity of disruptions to employment relationships, business ties to customers, and financial markets.”
The jobless claims report showed California processed the largest number of claims at 318,000, down from 325,000 the previous week, according to preliminary state-level estimates. Maryland had the biggest rise in new claims, with 65,000 filed, up from 38,000 the previous week. Some of the states that recorded lower claims — including Pennsylvania — reported fewer lay-offs at hospitals, restaurants and hotels.
Economists have questioned whether backlogs at state unemployment offices understated the depths of the blow to the labour market. They also caution that the US will continue to see a large number of claims as more people are furloughed and laid off, as well as through the expansion of state unemployment insurance programs to include those that are self-employed, including workers in the gig economy.
The pandemic brought an end to the longest stretch of US economic growth on record, with GDP contracting at the sharpest pace since 2008 in the first three months of the year as the effects of lockdowns and social-distancing became evident in the second half of March.
A separate report from the labour department showed US nonfarm business sector productivity fell 2.5 per cent in the first three months of the year — the biggest such drop since the end of 2015, although better than economists’ expectations for a steeper 5.5 per cent slide. The decline in productivity, a key driver of output and wage growth, came as hours worked fell by 3.8 per cent.
“The unprecedented Covid-19 shock put an end to the slow revival in productivity growth that took hold over the past three years,” Lydia Boussour, economist at Oxford Economics, said. “Going forward, the trend in productivity growth will probably settle at a very subdued pace amid sluggish business spending, an only gradual recovery in demand, and lower capital and labour mobility.”
Congress has passed four large spending packages since the outbreak, including loans for small businesses and stimulus relief cheques for American taxpayers to see them through the lockdowns.
Though hopes are growing that furloughed workers will return to their jobs with the gradual reopening of the economy, experts warn that the relief could be shortlived.
“Until widespread testing, an effective therapy, and a vaccine are in place, any improvement in employment is likely to be temporary,” Lazard’s Mr Temple said. “Premature efforts to reopen economies undermine our progress in controlling the pandemic and risk extending the duration of the downturn.”