The number of Americans filing first-time claims for unemployment benefits unexpectedly fell last week but remain elevated more than nine months into the health and economic crisis triggered by the coronavirus pandemic.
Initial claims for state unemployment benefits slid to a seasonally adjusted 787,000 for the week ended Dec. 26, compared with 806,000 in the prior week, the Labor Department said on Thursday. Economists polled by Reuters had forecast 833,000 applications in the latest week.
Though jobless claims have dropped from a record 6.867 million in March, they have held persistently above their 665,000 peak hit during the 2007-09 Great Recession. The weekly unemployment claims report, the most timely data on the economy’s health, aligns with other recent weak economic reports, including a decline in consumer confidence to a four-month low in December and drops in both consumer spending and income last month.
The latest report’s end date - Dec. 26 - was when as many as 14 million people were set to lose jobless benefits provided by a $3 trillion pandemic relief bill enacted in the spring. That was a cliff that lawmakers had raced to avoid by passing a nearly $900 billion supplemental package in the days before Christmas, including $600 payments to most individuals and extensions of unemployment benefits and eviction moratoriums.
President Donald Trump, however, railed against the deal negotiated by his own Treasury secretary, demanding higher payments to individuals, and did not sign it into law until Sunday after extensive badgering by senior lawmakers in his Republican Party.
It was unclear whether that lapse had a material effect on last week’s data or what impact it might have on the level of claims in the current week and those into the new year.
COVID-19 case growth also remains elevated, even though the surge in new infections appears for the moment to have peaked in mid-December, according to a Reuters tally. Restrictions on businesses, especially in the food and hospitality industries, remain in place in many parts of the country, keeping a lid on consumer spending and employment.
“(T)he correlation between the change in claims and the growth in COVID cases across states remains high, suggesting that until fiscal stimulus actually begins to land in households’ pockets, the spread of the virus remains the primary determinant of any recovery in the labor market and will likely weigh on job gains in the December employment report,” Deutsche Bank’s U.S. economics team wrote ahead of the latest release.