Jobless claims unexpectedly rise to 898,000 in troubling sign for recovery

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The number of new applications for unemployment benefits rose to 898,000 last week, the Labor Department reported on Thursday.

Forecasters had projected 825,000 new jobless claims.

In addition to claims for regular benefits, more than 370,000 workers filed new claims for the Pandemic Unemployment Assistance program, which provides for unemployment insurance for people sidelined by the epidemic who normally wouldn’t be eligible for regular benefits, such as gig workers whose business dried up. Combining both regular and PUA claims, roughly 1.3 million jobless workers filed for relief last week.

There is also the Pandemic Emergency Unemployment Compensation program that extends unemployment benefits for an additional 13 weeks. For the week ending Sept. 26, over 2.7 million jobless workers were receiving this benefit.

Both of these programs will expire on Dec. 31 if Washington fails to extend them, meaning that roughly 3 million jobless workers will have no income source being provided to them by the federal government in the new year.

That relief is not likely before the election, according to Treasury Secretary Steven Mnuchin. “At this point, getting something done before the election and executing on that will be difficult,” he told an audience Wednesday at the Milken Institute, a nonprofit think tank.

Thursday’s report indicates that the recovery from pandemic-induced layoffs is slowing, if not reversing. Last week’s jobless number is up from the prior week that had 840,000 initial applications.

“There is risk of stagnation in the coming months as layoffs mount and more businesses struggle or fail,” said Mark Hamrick, Bankrate’s senior economic analyst.

The last significant drop in new regular claims occurred in the second week of August when jobless applications dropped before a million for the first time since the pandemic hit the country in March. In recent weeks, new claims have hovered in the 800,000s.

The total number of jobless workers claiming benefits remains historically high. There were over 25 million claims for the week ending Sept. 25. For comparison, that number was roughly 1.4 million in the comparable week for 2019.

The stalled decline in jobless claims comes as job gains have cooled.

The economy added 661,000 jobs in September, much lower than in prior months.

Over a million jobs were created in August, and July saw an increase of 1.8 million. While these gains would be considered large by historical standards, they were much less than the 7.3 million jobs created in May and June.

Hamrick said the reason for the slowdown in hiring is that businesses are still exposed to the coronavirus. That has postponed hiring additional workers. One example of this is the restaurant industry, where owners have been unable to reopen their dining rooms and, therefore, cannot rehire laid-off staff.

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