United States jobless claims decline only slightly as aid deadlock persists

Ruben Fields
September 20, 2020

The number of people continuing to collect state unemployment benefits decreased by 916,000 to 12.6 million in the week ending September 5, the report showed.

The Fed on Wednesday kept its benchmark interest rate unchanged at the record-low level of near zero and signaled to maintain this target range until at least 2023, noting that the path of the economy will depend significantly on the course of the coronavirus.

Unemployment claims "remain high even as economic activity is resuming more fully", Rubeela Farooqi, chief USA economist at High Frequency Economics, wrote Thursday.

Economists have been warning about a threat of a downturn in the recession since Congress failed to renew some of the hundreds of billions of dollars of aid programs that many credited with stabilizing the economy earlier in the pandemic. At the same time, overall claims remain historically high, and the continuing stalemate over a new round of federal stimulus is squeezing millions of people after supplemental benefits expired in July and another temporary program started to run out of funds.

"The crisis has yet to abate, rehiring is growing slowly, and the struggles of families and businesses continue to fester", said Andrew Stettner, senior fellow at The Century Foundation in NY.

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ODJFS has received around 1 million applications for unemployment benefits and more than 94% of those have been processed. Production at factories also cooled last month.

After declining from a record 6.867 million at the end of March, as businesses reopened after being shuttered to stem the spread of the coronavirus, claims have flattened, with layoffs spilling over to industries not initially impacted by the mandated closures. Employers added 10.6 million jobs from May through August - but the United States still has recovered less than half the jobs lost in March and April. This spring, the airlines began receiving $25 billion in federal grants and loans to keep workers on their payrolls for six months.

Joseph Brusuelas, chief economist at the consulting firm RSM, explained why the claims data continue to be so troubling: "The pace of firings in the US economy remains well above anything observed during the Great Financial Crisis", he wrote in a commentary, adding that the numbers are "a reflection of the deep scarring in the domestic labor market and economy".

Despite the improvement, last week's claims were still about four-times higher than they were before the pandemic.

A separate report from the Commerce Department on Thursday showed single-family homebuilding, which accounts for the largest share of the housing market, increased 4.1% to a seasonally adjusted annual rate of 1.021 million units in August. USA employers added 1.4 million jobs in August, and the unemployment rate dropped to 8.4 per cent, according to earlier data from the Bureau of Labour Statistics.

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