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Ten months after the coronavirus crisis decimated the job market, the resurgence of the pandemic continues to send shock waves through the US economy.
Although more than half of the 22 million jobs lost last spring have been found, a new wave of infections has resulted in closures and layoffs that have hit the leisure and hospitality industries particularly hard, resulting in slowed down the recovery.
The latest evidence came on Thursday when the Labor Department reported that initial claims for state unemployment benefits rose sharply last week, surpassing 1 million for the first time since July.
Days earlier, the government announced that employers cut 140,000 jobs in December, the first sharp drop in employment since last spring, with restaurants, bars and hotels posting large losses.
“We’re in a deep economic hole and we’re digging in the wrong direction,” said Daniel Zhao, senior economist at career site Glassdoor. “The report obviously shows that the increase in claims is worse than expected, and there is reason to believe things will get worse before they get better.”
This prospect is all the more troubling as a major part of the relief plan that President Trump signed last month – a weekly federal supplement of $ 300 to other unemployment benefits – is expected to run out in mid-March.
President-elect Joseph R. Biden Jr. has said he will pass a new stimulus package through Congress to provide a lifeline for workers and employers until the pandemic can be brought under control. Its plan will include direct payments to most households as well as assistance to small businesses and local and state governments.
Recent economic data has brought a new sense of urgency to such efforts, with millions struggling to make ends meet even as more job losses may be in sight.
The Labor Ministry said Thursday that 1.15 million workers had filed an initial claim for unemployment benefits in the first full week of the new year. Another 284,000 claims have been made for Pandemic Unemployment Assistance, a federal emergency program for freelancers, part-time workers and others normally ineligible for state unemployment benefits. Neither figure is seasonally adjusted. On a seasonally adjusted basis, new Crown claims totaled 965,000.
Before the pandemic, weekly deposits typically totaled around 200,000 people.
The holidays may have dampened jobless claims in previous weeks, with people waiting until the New Year to submit claims. But several economists have expressed skepticism that filing delays were a major factor in the rise in claims last week.
“I don’t think there is any doubt that on the margin there could be some unusual things going on,” said Mark Hamrick, senior economic analyst at Bankrate.com. “But we also have to think about the fact that these aren’t our grandfather’s unemployment lines – which means a lot of this is done digitally. I think if you’re just trying to understand human nature, it doesn’t make much sense for someone to delay applying for financial aid when they’re out of work.
Economists say the $ 300 federal supplement is more likely to have increased demand for benefits.
Confusion over new federal aid – which Mr Trump spent several days threatening not to sign – may also have temporarily slowed claims for pandemic unemployment assistance, which fell over the week. ending January 2. line with previous high levels.
Even with new federal aid for the unemployed enshrined in legislation last month, processing payments – a task left to states – remains a concern after problems with the first round of emergency benefits last spring.
“States are extremely careful now to get as much advice as possible,” said Michele Evermore, senior policy analyst at the National Employment Law Project, a nonprofit workers’ rights group. But she said some states, including New York City, seemed better equipped to act quickly this time around, taking a “ask questions later” approach.
She said she expected that by next week most states would have “a significant portion” of their operational program, if not all of the components.
In addition to the $ 300 weekly supplement and short-term renewal of benefits for construction workers and the self-employed, the latest round of federal assistance has renewed Emergency Unemployment Compensation for Pandemic, a program intended for those whose state benefits have been exhausted.
The disparate nature of the state’s unemployment programs, some of which only provide 12 weeks of benefits under normal circumstances, has made them a target for Democrats. Mr. Biden is committed to ensuring that Americans can get their unemployment insurance “on time and in full,” and Senator Ron Wyden, Democrat of Oregon and new chairman of the Senate Finance Committee, said that ‘he would lobby to include a overhaul of the national unemployment benefit system.
Among the provisions supported by some Democrats is an automatic renewal of federal unemployment benefits and other aids until the unemployment rate drops to a certain level. This would alleviate the need for repeated congressional action in times of crisis.
In the meantime, as the coronavirus hits the service sector, employers are likely to cut more jobs in the coming weeks. Some struggling businesses may not survive.
“When I look at the pandemic situation and the health situation, people are still afraid of the virus, as they should be, and that is going to have an economic impact,” said AnnElizabeth Konkel, economist at Careers Indeed. “The virus is at the root of everything that is happening now.”
Still, economists and analysts see better times ahead, perhaps as early as the spring. As more people are vaccinated, cases will start to drop, which will ease restrictions on businesses and could lead to an upturn in consumer activity. Warmer weather could allow more people to congregate outside, slowing the spread of the virus, as was the case last year. A new stimulus package could also ease some of the economic suffering of the pandemic.
Yet even when the coronavirus becomes contained, economists say a recovery will not happen overnight.
“As we enter the second quarter, the economy should start to heal,” Bankrate’s Mr. Hamrick said. “But it’s clear that all of this took a lot longer than expected, and the healing will probably take time as well.”
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