The number of Americans applying for unemployment dropped last week, slipping below 1 million for the first time since the economic shutdown sparked by the coronavirus pandemic began in the spring.
The number of new applications for benefits, a rough gauge of layoffs, declined to 963,000, the Labor Department said Thursday. It was the second straight drop, from 1.2 million the previous week. And it's the first time weekly claims have dipped below 1 million since the week ending March 14, with the figure sharply below the 1.25 million some economists expected
But while the downward slide is a welcome trend, it doesn't mean the economy has rebounded.
"Another larger-than-expected decline in jobless claims suggests that the jobs recovery is regaining some momentum,'' Oxford Economics said in an investors note. "But with a staggering 28 million workers still claiming some form of jobless benefits, much labor market progress remains to be done."
The latest stream of applications is still historic, dwarfing the previous all-time weekly high of 695,000 during another economic downturn in 1982. And the latest tally means a stunning 56.2 million Americans sought unemployment aid in just 21 weeks.
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The number of claims has ebbed and flowed in recent weeks, but stubbornly remained above 1 million until now, painting a stark picture of the financial toll the coronavirus pandemic has taken as businesses cut staff and consumers warily watch their spending.
While the lower number of first-time jobless claims last week may signal that more Americans are finding work or being rehired, it might also reflect fewer people applying for assistance now that an extra weekly federal benefit of $600 has ended.
"The expiration of the $600/week supplement to unemployment benefits ... at the end of July may have made filing for benefits less attractive, leading to reduced filings,'' Daniel Silver of J.P. Morgan said in an investors note.
Continuing unemployment claims shrank to 15.5 million in the week ending Aug. 1, their lowest level since the start of April, but that is still "historically high ... underscoring the painfully slow recovery in the labor market,'' Oxford said.
Unemployment hits Sunbelt
Unemployment slipped to 10.2% in July, down from 11.1% in June. But the economy continues to stumble through fits and starts, with hard-hit industries like hospitality and retail companies bolstering their staff in some parts of the country, while businesses in the Sunbelt cut jobs as the coronavirus spikes there.
It's far too early to declare “mission accomplished,” Bankrate.com senior economic analyst Mark Hamrick said in an interview. "What we’re really doing is recovering some of the jobs lost.”
Hospitals appear to be stabilizing after shedding jobs earlier in the pandemic due to a postponement of elective procedures, he noted. Dentist offices have also reopened after temporary closures, fueling some job gains.
But travel businesses like airlines and hotel companies are still sluggish, with business travel in particular slow to bounce back, he said.
Early signs that the outbreak is ebbing in key hot spots might also have partially fueled the improved numbers, Hamrick said.
“All told, I think people are trying to walk a delicate balancing act here between resuming as much of their economic activity as they feel is safe and warranted,” Hamrick said.
And the amount of shifts Americans are working is increasing just 0.5% a week on average in August. says Dave Gilbertson, vice president of strategy and operations for Kronos, a workforce management software company.
"This indicates that while businesses may be recalling some furloughed employees, they continue to struggle to generate enough activity to return to full staffing capacity,'' Gilbertson said in an emailed statement, "hindered by a combination of summer seasonality, statewide reopening pauses or reversals, and, in some sectors, below-average consumer demand.''
Congress stalled over $600 benefit
Meanwhile, the extra financial aid and protections extended to help out-of-work Americans weather the economic downturn remains in limbo, with Congress unable to sign off on a new aid package. And the encouraging jobless claims report could make more federal aid appear less necessary.
“If it was going to take a sense of urgency to get Democrats and Republicans to come to an agreement, the stock market trading right near record highs and jobless claims back below a million aren't providing any ammunition,” Bespoke Investment Group analyst Paul Hickey wrote in an analysis Thursday.
Democrats want to reinstate the extra $600 through the end of the year while Republicans want to reduce it to $200 a week.
President Donald Trump issued a memorandum that would provide unemployed Americans with an additional $400 per week. But that will likely be pared back to $300 after states balked at the requirement that they kick in a quarter of the funding, a contribution they say they can't afford as they deal with their own budget shortfalls.
White House economic adviser Larry Kudlow said Tuesday that the states won't have to pay the additional $100 if they already provide at least that amount in jobless benefits, which most states do. Kudlow added that the checks should start going out in the next two weeks, but critics of the memorandum say that it may not be legal or even constitutional for Trump to bypass Congress and take such a step by executive action.
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Many businesses have also gone through the forgivable federal loans they received if they held onto or rehired their workers, leading to new rounds of layoffs.
Because those funds are running out, and Congress has not passed another financial assistance package "we may see a reversal in the gains in August,'' Sophia Koropeckyj, an economist at Moody’s Analytics, said in an investors note. "Without this extra support, consumer spending will certainly weaken.''
A deal will probably eventually be reached, she says. But it will take more than money to get the economy going again.
"We are still confident that Congress and the White House will rally to provide about $1.5 trillion in support,'' she said. "Yet, until a vaccine is widely available we do not expect the economy and labor market can climb completely out of the hole... Indeed we expect the economy to barely eke out any gains until 2021."
Contributing: Nathan Bomey
Follow Charisse Jones on Twitter @charissejones
This article originally appeared on USA TODAY: Unemployment claims: Less-than-expected 963,000 seek jobless benefits