U.S. Jobless Claims Unexpectedly Jump to Highest in Three Months
(Bloomberg) -- Applications for U.S. state unemployment benefits unexpectedly jumped to the highest level in three months, suggesting the labor market’s recovery is faltering amid the surge in Covid-19 cases and widening business restrictions.
Initial jobless claims in regular state programs rose by 23,000 to 885,000 in the week ended Dec. 12, Labor Department data showed Thursday. On an unadjusted basis, the figure fell by about 21,000.
Continuing claims for state programs declined by 273,000 to 5.51 million in the week ended Dec. 5. That figure roughly approximates the number of people receiving state unemployment benefits, but doesn’t include the millions of people who have already exhausted those benefits or are receiving assistance through federal pandemic jobless aid programs.
A Bloomberg survey of economists had called for 818,000 initial state claims and 5.7 million continuing claims on an adjusted basis.
The increase in initial claims reflects rising filings in California and Illinois, two states where governments have imposed particularly restrictive lockdowns in the wake of the latest Covid-19 surge. That, paired with cooler weather, has led to additional job losses and growing risks for the economy in the months before widespread vaccine distribution.
“Clearly the rise in claims is a troubling sign for the labor market,” even though seasonal distortions can make the figures more volatile at this time of year, said Michelle Meyer, head of U.S. economics at Bank of America Corp. “There’s a variety of indications that when you put the pieces of the puzzle together shows a weakening in the labor market in December.”
With the outlook shaky, U.S. lawmakers are working out final details of a new relief package that would extend pandemic jobless aid, while the Federal Reserve on Wednesday pledged to maintain its massive bond purchases until employment and inflation make “substantial further progress.”
What Bloomberg’s Economists Say...
“The labor market is showing clear signs of deterioration. ... We expect the trend to persist amid a sharp rise in virus cases and subsequent business restrictions weighing on employment conditions.”
-- Eliza Winger, associate
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U.S. stocks rose at the open, with the jobless claims numbers stoking bets that congressional leaders will clinch a deal on stimulus. Yields on 10-year Treasuries fell.
The latest initial claims data also coincide with the reference period for the December jobs report, adding to signs that the month could show a weakening labor market after payrolls increased by 245,000 in November, less than half the October gain.
On top of regular state claims, about 455,000 initial claims for Pandemic Unemployment Assistance were filed last week. The program, which provides jobless benefits to those not typically eligible like the self-employed and gig workers, is set to expire later this month without congressional action. There were 9.24 million continued weeks claimed for PUA in the week ended Nov. 28, up about 689,000 from the prior week.
In the same week, there were 4.8 million continuing claims for Pandemic Emergency Unemployment Compensation, the federal program that provides up to 13 additional weeks of benefits to those who have exhausted their regular state benefits. That program is also set to expire.
“The health crisis is likely to get worse after the upcoming holiday which will translate into even wider limitations on activity, business closures and mounting job losses,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a note. “Combined with lapsing federal support programs, the impact on incomes and spending will be substantial, which will weigh on growth prospects in the near term.”
While the labor market is struggling, housing remains a bright spot in the economy amid ultra-low interest rates and demand for more space. A separate government report on Thursday showed new home construction rose more than forecast to a nine-month high in November.
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