Another 2.4m Americans applied for unemployment benefits last week, bringing the total number of first-time applications to 38.6m since the coronavirus pandemic hit the world’s largest economy nine weeks ago.
The data released on Thursday confirmed the enduring damage to the US labour market inflicted by lockdowns to curb the spreading disease, raising pressure on the Federal Reserve, Congress and the Trump administration to take further monetary and fiscal action as the crisis drags on.
“Although it’s too soon to know now, the concern is that unemployment will continue to be an issue even after we begin the recovery,” said Jason Reed, a professor of finance at the University of Notre Dame’s college of business. “If the federal and state governments are not aggressive enough in combating unemployment, we might see permanently higher levels of unemployment and a second jobless recovery,” he said.
The figures showed the pace of weekly jobless applications declining, by 249,000, marking the second seventh consecutive drop.
But the overall tally remained high at 2.4m, in line with economists’ forecasts, and heralds a further increase in the total unemployment rate in May from the 14.7 per cent rate recorded in April.
Ernie Tedeschi, an economist at Evercore ISI, wrote on Twitter that the latest jobless claims figures were historically consistent with a real-time unemployment rate of 18.5 per cent.
In the latest week, California recorded the highest number of first-time applications with 246,115, followed by New York and Florida with 226,521 and 223,927 claims respectively, according to preliminary state-level estimates that have not been seasonally adjusted.
The previous week’s total figures had been revised lower to 2.69m, down from 2.98m initially, reflecting a revision to Connecticut’s data after officials reported an error had overstated the number of people seeking jobless benefits.
The number of people actually receiving benefits rose to 25.07m for the week ending May 9, and those receiving unemployment insurance comprised 17.2 per cent of all workers that week.
The pace at which rehiring outpaces job losses “will be the best barometer of how fast and how completely the economy is recovering,” said Joshua Shapiro, economist at MFR.
“We expect that an initial burst as major population areas reopen will be followed by a longer period where improvement is slower and more uneven, with it taking many quarters for the economy to claw its way back to pre-pandemic levels,” he said.
The report comes as hopes rise that lay-offs will peak soon as economies begin to gradually reopen and some furloughed employees resume work while others find new jobs. However, concerns remain that job cuts which were expected to be temporary will become permanent.
Federal Reserve chair Jay Powell has warned that a full US economic recovery may take until the end of next year and could depend on the development of a Covid-19 vaccine.
The minutes of the Federal Reserve’s April monetary policy meeting showed officials believed the pandemic, which has already killed more than 87,000 people in America, would “continue to weigh heavily on economic activity, employment, and inflation in the near term and would pose considerable risks to the economic outlook over the medium term”.
The US Congress has already approved nearly $3tn of economic relief measures to support struggling businesses and households but pressure has been building for additional relief.
Last week, the Democrat-controlled House of Representatives, led by Nancy Pelosi, approved a $3tn in new stimulus spending, but it was immediately rejected by Republicans who control the Senate, raising doubts about the prospects for more fiscal support from the US Congress.
The Democratic plan includes an extension of federal jobless benefits worth $600 per week, which are due to expire in July, until early 2021, but Republicans have argued this risks disincentivising the return to work as states reopen their economies.