US unemployment claims fall to 779,000 but hiring remains weak

In all, 17.8 million people were receiving jobless benefits the week ending January 16, down from 18.2 million the week before.

Thursday's report reflects a United States job market that is still suffering from the coronavirus pandemic, with hiring having weakened for six straight months [File: Rich Pedroncelli/AP Photo]

The number of workers in the United States filing for unemployment benefits with states declined to 779,000 last week, a still historically high total that shows that a sizable number of people keep losing jobs to the viral pandemic.

Last week’s total dropped from 812,000 the previous week, the US Department of Labor said on Thursday, and is the lowest in two months. Still, before the virus erupted in the US in March, weekly applications for jobless aid had never topped 700,000, even during the Great Recession of 2007-2009.

Thursday’s report reflects a US job market that is still suffering from the pandemic, with hiring having weakened for six straight months. It is a key reason why President Joe Biden is pushing Congress to enact a $1.9 trillion economic rescue programme, on top of a $900bn federal aid package that was approved late last year.

All told, 17.8 million people were receiving unemployment benefits in the week that ended January 16, the latest period for which data are available. That’s down from 18.3 million from the week before.

Despite the generally dim picture of the economy, some hopeful signs have emerged this week. Auto sales rose solidly in January, and a gauge of business growth in the service sector picked up. So did spending on home construction.

That doesn’t mean a rebound is near in the job market, which typically lags behind recoveries in the broader economy. Employers have been hesitant to hire at a time when consumer spending has faltered.

The government’s jobs report for January, to be released Friday, is expected to show a modest hiring gain of perhaps 100,000, according to data provider FactSet. The unemployment rate is forecast to remain stuck at a high 6.7 percent for a third straight month.

An increase in hiring would represent a welcome improvement over December, when employers cut jobs for the first time since April. Yet with the economy still down nearly 10 million jobs from its level before March, a gain of that modest size would provide little benefit for most of the unemployed.

Once coronavirus vaccinations become more widely distributed and administered in the coming months, economists expect growth to accelerate at a sustained clip, particularly if Congress provides significantly more aid to households, small businesses, states and cities. Some analysts predict that under those circumstances, economic growth could surpass 6 percent for 2021.

Consumer spending did pick up in January, according to debit and credit card spending tracked by Bank of America, after $600 cheques were distributed to most adults under last year’s $900bn aid package. Michelle Meyer, US economist at Bank of America, estimates that those cheques are being spent faster than the similar but larger $1,200 payments that were distributed last spring.

A worker cleans along the Las Vegas Strip, devoid of the usual crowds as casinos and other businesses are shuttered due to the coronavirus outbreak in Las Vegas, Nevada, the US [File: John Locher/AP Photo]

Still, Americans are saving the bulk of the payments, Meyer said in a research note. That growing pool of savings could help fuel increased consumer spending once the pandemic is brought under control.

At the same time, small businesses struggled through most of January and likely held back overall hiring last month, according to Homebase, a provider of work scheduling systems to small firms. Homebase said the proportion of its clients that were closed, mostly because of government restrictions, rose from December to January, and the number of employees working declined.

Although the $900bn stimulus bill enacted in December extended federal unemployment programmes and provided $300 in weekly jobless aid, many states have yet to distribute the money, according to a report this week from the Century Foundation. The report found that just 38 states were paying benefits under a federal extended aid programme as of January 30. Just 40 states were issuing cheques under a separate jobless aid programme for freelancers and the self-employed.

The delays in many cases stemmed from former President Donald Trump’s hesitation in signing the stimulus bill, which he finally did on December 27. That was one day after the two programmes had expired, which meant that previous recipients had to reapply for the programmes and states had to await guidance from the Department of Labor on the details of the extensions. Many states use antiquated software for their unemployment benefit systems, which can be difficult to update when jobless aid programmes change.

Source: AP