The number of Americans filing new claims for unemployment benefits came in at about 1 million last week, suggesting continuing labor market weakness amid the economy’s fitful recovery from the depths of the COVID-19 recession.
Initial claims for state unemployment benefits totaled a seasonally adjusted 1.006 million for the week ended Aug. 22, compared to 1.104 million in the prior week, the Labor Department said in a release on Aug. 27 (pdf).
Jobless claims fell below 1 million three weeks ago for the first time in months, raising expectations for the labor market to continue its hopeful rebound trajectory. But with weekly claims now seeming to plateau at around a million, concern is growing that the much-hyped V-shaped economic recovery may flatten or give way to another recessionary dip.
“We are clearly in the second phase of the recovery, driven by underlying fundamentals rather than purely the surge in activity as household reengaged,” said James Knightley, chief international economist at ING in New York. “This reinforces our view that a V-shaped recovery will not happen, and the U.S. economy is unlikely to recover all of its lost output until mid-2022.”
America’s record-long economic expansion that saw unemployment fall to 3.5 percent was cut short by the CCP (Chinese Communist Party) virus outbreak. Lockdowns and business shutdowns decimated the labor market, with 20.5 million jobs lost and the unemployment rate surging to 14.7 percent in April, both post-World War II records.
“It was awful. Health and economic impacts were tragic. Hardship and heartbreak were everywhere,” White House economic adviser Larry Kudlow said of the CCP-virus-related recession in remarks at the Republican National Convention, during which he noted that the Trump administration plans to introduce another round of tax cuts in a bid to spur growth, create jobs, and bring the economy back online.
A separate report from the Commerce Department on Aug. 27 confirmed the economy suffered its deepest contraction in at least 73 years in the second quarter. Gross domestic product plunged at a 31.7 percent annualized rate last quarter, the government stated in its second estimate. While a slight upward revision from the agency’s July estimate of minus 32.9 percent, the number confirms the historic depth of the pandemic plunge.
The Labor Department release also showed that continuing jobless claims, which reflect people who continue to collect unemployment benefits after making an initial filing, fell by 223,000 for the week ended Aug. 15, to around 14.5 million. The total number of people claiming benefits in all programs for the week ending Aug. 8 was just over 27 million, a drop of more than 1 million from the previous week.
The Labor Department’s jobless numbers lend weight to economists’ view of a bumpy road to economic recovery.
The minutes from a Fed policy meeting in July, released Aug. 19, show officials warning of “extremely elevated” levels of uncertainty around the economic outlook and saying they expect the pandemic to continue to exact a heavy toll on the U.S. economy.
Echoing warnings by economists that recovery is tied to virus containment, Fed officials at the meeting “noted that the path of the economy would depend significantly on the course of the virus and that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and posed considerable risks to the economic outlook over the medium term,” the document shows.
Fed officials said that, besides the virus, risks to America’s fledgling economic recovery include uncertainty about the sustainability of the recent surge in consumer spending compounded by a possible pullback in stimulus. Congress has, since March, approved roughly $3.6 trillion in new spending to counteract the pandemic blow to the economy but talks have stalled on further measures, prompting President Donald Trump to take executive action, including extending pandemic unemployment benefits and deferring payroll taxes.