Initial Jobless Claims Hit 5-Month High as Pandemic Saps Labor Market Strength

Initial claims for jobless benefits surged last week to their highest level in five months as the restrictive measures put in place around the country to stop the Covid-19 pandemic continued to take their toll on the U.S. labor market.

The Labor Department said 965,000 people filed initial jobless claims last week, up from 784,000 and well above the 795,000 expected.

The number of continuing claims under regular state programs also rose by some 200,000 to 5.27 million. A further 13 million are claiming unemployment benefits under other programs, chiefly the Pandemic Emergency Unemployment Compensation scheme.

The figures from the last two weeks have been distorted by volatility in the reports filed by Illinois, which showed a sharp and uncharacteristic drop last week, only to post more claims than any other state this week. However, even allowing for that, the increase in claims is clearly bigger than expected, and suggests a further weakening in conditions since the cut-off date for December’s employment report.

The monthly jobs report showed the devastation being suffered by the hospitality industry due to restrictions on social gatherings that seem destined to last for weeks to come.

“January is shaping up to be another down month for employment,” said Diane Swonk, chief economist with Grant Thornton, via Twitter.

While U.S. authorities have been rolling out vaccines since their approval by the Food and Drug Administration, the overall level of protection among the population remains low. That argues against relaxing restrictions in the near term. Fatalities across the U.S. due to Covid-19 have topped 4,000 on both of the last two days, and the overall number of lives lost, at 385,000, is fast closing in on the 418,000 suffered during World War II.

U.S. President-elect Joe Biden has said that extending benefits for those made jobless by the pandemic will be a central part of a broad stimulus plan “in the trillions of dollars”, which are due to be announced later Thursday.