The number of Americans filing new claims for jobless benefits declined more than expected last week, though they remain extremely high indicating a slowdown in the labor market and broader economic recovery from the COVID-19 pandemic as the boost from fiscal stimulus fades.
Initial claims for state unemployment benefits totaled a seasonally adjusted 787,000 for the week ended Oct. 17, compared to 842,000 in the prior week, the Labor Department said on Thursday. Economists polled by Reuters had forecast 860,000 applications in the latest week.
Claims have been stuck above their 665,000 peak during the 2007-09 Great Recession, though they have declined from a record 6.867 million in March. A more than $3 trillion rescue package early this year provided a life-line for many businesses, allowing them to keep workers on payrolls. It also lifted economic activity from the downturn, which started in February.
With funding depleted, businesses, especially in the transportation industry, are either laying off or furloughing workers as demand remains subdued.
Economists are predicting claims will remain elevated amid a resurgence in new coronavirus cases around the country, which they say could lead to state and local government restrictions or more people shunning establishments like restaurants and bars.
Though Democratic House of Representative Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin are working out details of a new relief package, a deal is unlikely before the Nov. 3 presidential election amid stiff opposition in the Republican-controlled Senate.
The pandemic, which has killed more than 221,000 Americans and caused the worst economic crisis in at least 73 years, could cost President Donald Trump a second term in the White House. Trump is trailing former Vice President and Democratic Party candidate Joe Biden in national opinion polls.
Last week’s claims report covered the period during which the government surveyed businesses for the nonfarm payrolls component of October’s employment report. Payrolls increased by 661,000 jobs in September, the smallest gain since the jobs recovery started in May.
A report from the Federal Reserve on Wednesday showed employment increasing in almost all of its 12 districts in early October, though the U.S. central bank noted that “growth remained slow.” The Fed said “employment gains were reported most consistently for manufacturing firms, although firms continued to report new furloughs and layoffs.” It described the economy as growing at a “slight to modest” pace.
That is consistent with economists’ projections for slower growth in the fourth quarter after what is believed to have been a record performance in the third quarter.
July-September quarter GDP growth estimates are as high as a 35.3% annualized rate.
The economy contracted at a 31.4% pace in the second quarter, the deepest decline since the government started keeping records in 1947. Growth estimates for the fourth quarter have been cut to as low as a 2.5% rate from above a 10% pace.
The government is scheduled to publish its snapshot of third quarter gross domestic product Thursday.