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The number of Americans filing for unemployment insurance unexpectedly rose last week, a sign of the job market’s fragility five months after the coronavirus pandemic began to devastate the economy.
The economy remains challenging for many American workers, with the unemployment rate at 10.2 percent and sectors like leisure and hospitality experiencing huge losses in employment.
Last week, 1.1 million workers filed new claims for state unemployment benefits, the Labor Department reported Thursday, compared with 971,000 the previous week. Before the pandemic, weekly claims averaged around 220,000.
“This is not a sign of a healthy labor market,” said Carl Tannenbaum, chief economist at Northern Trust in Chicago.
“We won’t see a renewal of hiring until the pandemic is under much better control,” he added. “We have made substantial and rapid improvement in the last three months, but improvement from here will prove slower and more difficult.”
There were 543,000 new claims last week for Pandemic Unemployment Assistance, a separate program aimed at self-employed people, gig workers and others not covered by traditional unemployment benefits. That number, unlike the figures for state claims, is not seasonally adjusted.
The job market continues to reflect the economy’s upheaval. Even as roughly one million new claims are filed weekly for unemployment insurance, the Labor Department reported this month that employers added 1.8 million jobs in July.
At the same time, many economists are worried that a cutback in federal spending to relieve the distress will cause the economy to slow in the months ahead.
“Government support has been incredibly helpful in supporting consumer spending and confidence,” said Scott Anderson, chief economist at Bank of the West. “My concern is that it’s being removed right now.”
Even as nearly one million Americans file new state claims for unemployment benefits each week, the stock market is hitting record highs. Hotels and airports are nearly empty and many restaurants remain closed, but home building is booming and retail sales are back to levels that preceded the pandemic.
The crosscurrents in the economy are striking, but economists warn that conditions could easily deteriorate if Washington doesn’t offer more support.
Republicans and Democrats have been unable to agree on a new coronavirus relief package to augment the CARES Act, passed in March. A $600 weekly federal supplement to state unemployment insurance expired at the end of last month, and a $300-a-week replacement engineered by President Trump is having trouble getting off the ground.
“Federal support is crucial to underpinning the virtuous cycle we’ve had,” said Michael Gapen, chief U.S. economist at Barclays. “The longer negotiations stall, the more likely there will be a hiccup in spending.”
“As long as we get a package in September, the outlook is OK,” Mr. Gapen said. But Republicans and Democrats remain far apart, even as the economy hangs in the balance.
The power of the government’s efforts to help are apparent in the data, Mr. Gapen said. Personal income in June totaled $19.9 trillion at an annual rate, up from $19.1 trillion in February, before the pandemic. “With unemployment at 10 percent, that’s only happening with federal transfer payments,” Mr. Gapen said.
After spending up to six hours a day submitting more than 600 applications since being furloughed this spring and then laid off in late July, Sonia Vance, 42, finally landed a new job.
In a few weeks, she starts as an eyewear consultant in California, Md., earning $16 an hour. It pays far less than the dream job she had before — a $48,000-a-year human resources role at a staffing company — but it comes with health insurance.
The cushion is comforting, because Ms. Vance must now go to work each day in an office, despite health issues that she fears could complicate a recovery if she catches the coronavirus.
Reflecting the experience of millions who scrambled for work after their careers evaporated in the pandemic, Ms. Vance said the past few months had been “heartbreaking and very emotional.”
This week, she moved from Maryville, Tenn., and will stay temporarily with a friend. She is finishing up bankruptcy paperwork and expects to lose her mobile home.
“You do feel relief that you have a job, but there’s also a sense of shame and embarrassment,” she said. “You’re out there doing everything you can to be a good member of society and to take care of your own, but it just takes a few months to wipe out all of your hard work.”
Eleven states have been approved for a Federal Emergency Management Agency program that will give unemployed workers an additional $300 in weekly benefits, but many others are holding off on applying as they try to understand what the program entails.
Acting on an Aug. 8 memorandum from President Trump, the federal agency said it had approved Arizona, Colorado, Idaho, Iowa, Louisiana, Maryland, Missouri, Montana, New Mexico, Oklahoma and Utah for access to three weeks of funds.
Arizona was the first state to make the so-called lost wages payments, sending $96 million to 320,000 people on Monday and Tuesday. But other participating states said that they needed to reprogram their systems and that they did not expect to start payments for several weeks.
“We have to build a whole new subset system with new rules and new reporting requirements with a department that we’re not really familiar with,” said Bill McCamley, the secretary of the New Mexico Department of Workforce Solutions. “We want to dot all of our i’s and cross all our t’s.”
Among the changes that must be factored in: The new program offers a smaller benefit than the weekly $600 federal supplement that expired at the end of July. And only people who already qualify to receive at least $100 in unemployment benefits each week are eligible for the federal funds, which are retroactive to Aug. 1.
The program gives states the option to contribute $100 in additional funds, increasing the weekly benefit to $400. But some states, like Colorado, are nervous about chipping in, citing severe budget shortfalls.
States have until Sept. 10 to apply for the funds.
Penny Ickes, a spokeswoman for the Pennsylvania Department of Labor and Industry, said the state planned to apply, but added that lawmakers should try to extend the original $600 stimulus.
“The president’s convoluted, temporary, half-baked concept has left many states, including Pennsylvania, with more questions than a clear path forward to continue providing financial relief to Pennsylvanian families,” she said.
Futures for the S&P 500 pointed to a decline of about half a percent when trading begins after the U.S. government released new figures on weekly state jobless claims.
The Labor Department’s report on the health of the job market served as a reminder of the fragility of the economic recovery: The tally of new claims for state unemployment benefits unexpectedly rose to over 1.1 million.
The S&P 500 ended lower Wednesday after minutes from the Federal Reserve’s last meeting revealed concerns that the U.S. economy needed more financial support from Congress.
The Fed minutes rattled Wall Street, which has been soaring lately. But earlier in the day, Apple briefly reached a valuation of $2 trillion, another milestone for the maker of iPhones, Mac computers and Apple Watches, punctuating how the pandemic has been a bonanza for the tech giants.
On Thursday, the major European indexes were all down by about 1.5 percent. Asian indexes broadly lost ground.
Work sharing programs are extraordinarily popular among economists, Republican and Democratic policymakers, employers and workers — at least those who have heard of them. The problem is that few have, even though economists say work sharing is one of the best ways to strengthen the labor market during a downturn.
Of the roughly 30 million people receiving unemployment benefits, only 451,000 — just 1.5 percent — are getting them through a shared work program.
Congress sweetened the program’s appeal during the pandemic, promising as part of the CARES Act that the federal government would pick up the cost from the states through the end of the year, without an overall cap, but nearly half of all states still don’t have such a program.
“I’m sick of this being the ‘best kept secret,’” Suzan LeVine, commissioner of Washington’s Employment Security Department, said of the program, officially titled short-time compensation. “It is the diamond in the rough of the unemployment benefits system.”
Washington State, which started its program in 1983, has vastly expanded participation since the pandemic. From March to August last year, 688 businesses took part; now 3,560 are doing so. One in nine Washington workers receiving state jobless benefits is getting them through work sharing.
Ted Brown Music is one business taking part. Although program rules can vary by state, companies must apply individually, and file a separate plan for each unit or category of workers. Ted Brown Music was approved within two weeks.
Now 150 of its employees are taking part. They are paid an hourly wage for the time they work, and receive state unemployment benefits for the hours they don’t.
Jim Stevens, who joined the company in 1970 and knew its founder, was laid off for six weeks after the pandemic hit. “That was just terrible,” said Mr. Stevens, a salesman in the flagship Tacoma store that his wife, Ellie, manages. “I’ve never been unemployed for any major period in my life.” He was later brought back to work 28 hours a week under the work sharing program.
Qantas Airways, Australia’s national carrier, swung to a loss of 1.96 Australian dollars, or $1.4 billion, for the 2020 financial year, as the pandemic devastated the airline industry worldwide. The loss was driven primarily by a write-down of assets, including its A380 fleet, and restructuring costs intended to help it survive during the pandemic, the airline said in a statement on Thursday. “The impact of Covid on all airlines is clear,” the company’s chief executive, Alan Joyce, said in the statement. “It’s devastating and it will be a question of survival for many.”
Estée Lauder Companies said Thursday that it would cut about 1,500 to 2,000 jobs globally and close 10 to 15 percent of its stores. It reported that in the fourth quarter net sales fell to $2.43 billion from $3.59 billion a year ago. The company operates cosmetic and skin care brands like MAC Cosmetics, La Mer and Jo Malone London.
This should be a time of keen anticipation for David Leske. A lighting and sound technician in Ridgway, Pa., he works in local schools to make plays, assemblies and other shows come to life.
But a few weeks before the school year is to begin, the coronavirus pandemic is still preventing large indoor gatherings. In some cases, schools are sticking to online instruction.
“Our local district has no intention of doing school plays,” Mr. Leske said. “The high school auditorium is now a storage area.”
Mr. Leske, 52, said that work began to dry up in March and that the Pandemic Unemployment Assistance program — which covers independent contractors, self-employed workers and others who don’t qualify for regular state benefits — had been crucial to keeping him afloat, especially with the $600 weekly federal supplement that expired at the end of last month.
He expects to be out of work through September 2021 as schools hold off on plays and assemblies.
“That extra $600 is what’s been keeping us alive,” Mr. Leske said. Without it, he and his wife have been forced to tap their savings. “It’s scary,” he said.