The number of Americans filing new claims for unemployment benefits fell less than expected last week and applications for the prior period were revised up, suggesting the labor market recovery had shifted into low gear amid fading fiscal stimulus.
The weekly jobless claims report from the Labor Department on Thursday, the most timely data on the economy's health, also showed nearly 30 million people were on unemployment benefits at the end of August, laying bare both the continuing economic and human devastation six months after the COVID-19 pandemic started in the United States.
The Federal Reserve on Wednesday vowed to keep interest rates near zero for a long time, noting that the coronavirus "will continue to weigh on economic activity" in the near term and "poses considerable risks to the economic outlook over the medium term." Fed Chair Jerome Powell said more fiscal support was likely to be needed for the economy.
"With nearly 30 million people unemployed and the ongoing failure of politicians to deliver additional needed fiscal stimulus, the climb out of the pandemic downturn is likely to be slower and more damaging to long-term growth than it should have been," said Ron Temple, head of U.S. equity at Lazard Asset Management in New York.
Initial claims for state unemployment benefits fell 33,000 to a seasonally adjusted 860,000 for the week ended Sept. 12. Data for the prior week was revised to show 9,000 more applications received than previously reported.
Economists polled by Reuters had forecast 850,000 applications in the latest week.
Unadjusted claims dropped 75,974 to 790,021 last week. Economists prefer the unadjusted claims number given earlier difficulties adjusting the claims data for seasonal fluctuations because of the economic shock caused by the coronavirus crisis.
A total 658,737 applications were received for the government-funded pandemic unemployment assistance last week. The PUA is for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs. Altogether, 1.45 million people filed claims last week.
The claims report also showed the number of people receiving benefits after an initial week of aid declined 916,000 to 12.628 million in the week ending Sept. 5. Economists attributed the drop in the so-called continuing claims to people exhausting their eligibility for benefits, which are limited to 26 weeks in most states.
The number of people on a government-funded program that provides up to 13 additional weeks of benefits to individuals who have exhausted their regular unemployment compensation increased 104,683 to 1.5 million in the week ending Aug. 29.
"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 New York.
A report from the Philadelphia Fed on Thursday showed factory activity in the mid-Atlantic region moderating in September, though manufacturers remained optimistic about growth over the next six months. Reports this week showed a slowdown in retail sales and production at factories in August.
LONG ROAD TO RECOVERY
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.
A $600 weekly unemployment benefits supplement ended in July and was replaced with a $300 weekly subsidy, which is not available in all states and is expected to run out of funding this month. A program to help businesses with wages lapsed in August, while $25 billion in government assistance for airline payrolls expires this month.
Last week's claims covered the period during which the government surveyed businesses for the nonfarm payrolls component of September's employment report.
"Unemployment insurance claims indicate that job growth will be slower through the rest of 2020 and that full recovery in the labor market will take years," said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania.
The economy added 1.371 million jobs in August and has recouped 10.6 million of the 22.2 million jobs lost at the depth of the coronavirus crisis.
Unemployment has disproportionately affected low-wage workers, who are typically renters, limiting the hit from the pandemic on the housing market.
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.
Further gains are likely, with building permits for single-family housing units accelerating 6.0% to a rate of 1.036 million units, the highest since May 2007. A 22.7% tumble in starts for the volatile multi-family housing segment, however, led to a 5.1% drop in overall homebuilding to a rate of 1.416 million units last month.
The housing market is being fueled by record low interest rates and a pandemic-fueled migration to suburbs and low density areas.
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