The number of Americans filing first-time claims for jobless benefits increased further last week, suggesting that an explosion in new COVID-19 infections and business restrictions were boosting layoffs and undermining the labor market recovery.
Initial claims for state unemployment benefits totaled a seasonally adjusted 778,000 for the week ended Nov. 21, compared to 748,000 in the prior week, the Labor Department said on Wednesday. Economists polled by Reuters had forecast 730,000 applications in the latest week.
The weekly claims report, the most timely data on the economy’s health, was published a day early because of Thursday’s Thanksgiving Day holiday.
The United States has been slammed by a fresh wave of coronavirus infections, with daily cases exceeding 100,000 since early November. More than 12 million people have been infected in the country, according to a Reuters tally of official data.
The respiratory illness has killed more than 257,000 Americans and hospitalizations are soaring, prompting state and local governments to reimpose a host of restrictions on social and economic life in recent weeks, which could keep claims above their 665,000 peak seen during the 2007-09 Great Recession.
Unemployment claims dropped from a record 6.867 million in March as about 80% of the people temporarily laid off in March and April were rehired, accounting for most of the rebound in job growth over the last six months.
That improvement, which spilled over to the broader economy through robust consumer spending, was spurred by more than $3 trillion in government coronavirus relief.
A separate report from the Commerce Department on Wednesday confirmed the economy’s historic pace of expansion in the third quarter. Gross domestic product grew at an unrevised 33.1% annualized rate, the government said in its second estimate of third-quarter output.
The economy contracted at a 31.4% rate in the second quarter, the deepest since the government started keeping records in 1947.
But the fiscal stimulus has largely expired and another rescue package is expected only after President-elect Joe Biden is sworn in on Jan. 20. President Donald Trump is heavily focused on contesting his electoral loss to Biden.
Growth estimates for the fourth quarter are below a 5% annualized rate. Despite encouraging developments on vaccines, spiraling COVID-19 infections as the cold season starts have led economists to sharply downgrade their GDP growth forecasts for the first quarter of 2021.
Goldman Sachs cut its estimate to a 1.0% rate from a 3.5% pace. JPMorgan expects GDP to contract at a 1.0% pace in the January-March quarter. But St. Louis Federal Reserve President James Bullard sees little risk of a resumed contraction in the economy. While some recent economic data has not been as strong as it had been earlier in the fall, nonetheless “so far I think we’re holding up,” he said on Tuesday.
Bullard expects the economy to post above-trend growth in both the fourth quarter and into the first part of 2021.
Labor market momentum was already slowing before the resurgence in coronavirus infections. The government reported early this month that nonfarm payrolls increased by 638,000 jobs in October, the smallest gain since the jobs recovery started in May. That followed 672,000 jobs added in September.
Only 12.1 million of the 22.2 million jobs lost in March and April have been recovered.