Rise in Unemployment Claims Signals an Economic Reversal

on Jul24
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New state unemployment claims increased last week for the first time in nearly four months, disturbing evidence that the struggling economy is backsliding at a time when coronavirus cases are on the rise.

After a flood of claims as the pandemic shut businesses early in the spring, weekly unemployment filings fell sharply before flattening in June. But on Thursday, the Labor Department reported more than 1.4 million new applications for state benefits last week, up from about 1.3 million in the preceding two weeks.

Another 975,000 jobless workers filed for benefits through an emergency federal program, also an increase. Unlike the figure for state claims, that number is not seasonally adjusted.

Claims are rising just as a $600-a-week federal supplement to jobless benefits is set to expire and Republican infighting has kept the party from putting forward a proposal for further aid, much less negotiating with Democrats on a bill.

The stubbornly high rate of new unemployment claims “suggests that the nature of the downturn has changed from early on,” said Ernie Tedeschi, a policy economist at the equity research firm Evercore ISI. In addition to reflecting renewed shutdowns, he said, the setbacks on the job front may indicate something more fundamental.

“It might be that businesses are running through their first line of credit,” he said, “and now they’re facing the music of an economy that has recovered a little bit but not nearly enough.”

In that case, temporary business closings and layoffs would increasingly turn into permanent ones.

Even before this setback, “we were already barely making it,” said Ms. Knight, who lives in Alexandria. She had been working part time at a property-management company during the day while her husband took care of their three children — 3, 5 and 9 years old. During his 4 p.m.-to-midnight shift, she took over the household duties. After kissing the children good night, she worked at her second job, as a pediatric sleep consultant.

Ms. Knight called it “tag-team parenting.” But she put up with the exhaustion and stress so they could save enough to stop renting and buy a house with more than one bathroom.

The coronavirus pandemic added full-time home-schooling to their load. She stopped going to the small property-management office during the day to avoid contagion, instead driving there at night when it was less crowded or empty.

“Mom and Dad were at the end of our ropes, beyond exhausted,” she said. “I started to have panic attacks.”

Her husband recently found another job, working for the government, but has to wait at least six to eight weeks for his security clearance.

“It’s important that we look at the way in which this crisis is having a disparate effect on the African-American community, particularly Black men,” he said.

And while the overall jobless rate dipped in June to 11.1 percent from a peak of 14.7 percent in April, troubling weaknesses are growing more prominent.

“The increased joblessness will certainly hinder the economic recovery, especially if the Congress fails to extend the supplemental benefits that were part of the CARES Act,” said Carl Tannenbaum, chief economist at Northern Trust.

Passed at the end of the March, the legislation created a temporary federal jobless program, Pandemic Unemployment Assistance, to cover freelancers, part-time workers and others who do not qualify for regular state jobless aid. It extended jobless benefits for an extra 13 weeks for state recipients who exhausted their aid allotment. And it helped jobless workers survive the cash crunch by approving a weekly $600 benefit — a supplement that essentially expires on Saturday.

That extra money “provided critical support over the last several months,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. Such support — even at a reduced level — “is going to be increasingly important going forward,” she said.

Ben Casselman and Tiffany Hsu contributed reporting.

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