Unexpectedly, new jobless claims rose for the second week in a row. This is yet another indication that the economy may be struggling more than expected as the United States attempts to control the recent spike in Covid-19 cases.
Jerome Powell, Federal Reserve Chair, said Wednesday that people who were working in February 2020 will return to work when it is time. He was also lamenting the impact of the delta variant on the labor market. He said, "It just might take longer time," he continued. Getty Images
The Key Facts
According to weekly data, 351,000 people filed jobless claims during the week ended September 18, an increase of 16,000 over the previous week. Bloomberg reports that economists expected only 320,000 new claims. The reading reached a low of 312,000 for the week ending September 4. The number of continuing claims filed jumped to 2.8 million131,000, an increase of about 10% over the week before. The Labor Department reports that there are 8.4 million Americans still unemployed. This is significantly higher than the 4,000,000 in February 2020.
Bankrate analyst Mark Hamrick stated Thursday that the long-awaited progress in new claims was not in the latest snapshot. He pointed to significant increases in claims from California, Virginia, and Louisiana following Hurricane Ida. He said that further progress in the unemployment rate this year may not be as encouraging as previously hoped. This is due to the delta variant pushing some economic activity into future.
Jerome Powell, Federal Reserve Chair, lamented the slow recovery of labor markets in a Wednesday press conference. It seems that it is still inexorably...people who were mostly working in February 2020 [will] get their jobs back when its time; it just might take longer, Powell stated. He blamed the spread of Covid-19’s delta variant for the lack of jobs in the travel and leisure sectors. The Fed stated Wednesday that unemployment could continue to rise above pre-pandemic levels through 2023. According to the Labor Departments monthly job report, the unemployment rate was 5.2% in August. This is down from 5.4% in July, and much higher than the pre-pandemic levels of below 4%.
Recent data has shown that the labor market continues to struggle. The labor market saw its worst month since January, with only 235,000 jobs added back despite predictions calling for almost 1 million more. Mark Zandi, chief economist at Moodys Analytics, stated that the delta variant of Covid-19 seems to have hampered the recovery in the job market. He also spoke out about the poor employment readings to echo Powell and other experts who believe the pandemics resurgence is starting to slow down the recovery. Last week saw 335,000 Americans file for their first-time benefits, which was higher than anticipated. According to Bank of America estimates that 7.5 million Americans have stopped receiving unemployment benefits due to the expiration of federal government's pandemic-era unemployment relief. Another 3 million saw their unemployment checks reduced by $300 per week, making this the largest ever cutoff of U.S. unemployment benefit benefits.
New Unemployment Claims Unexpectedly Increase Despite the End Of Federal Benefits for 11 Million Americans (Forbes).
U.S. added 235,000 jobs in AugustRevealing the 'Major" labor market slowdown as Delta Variant threatens economic recovery (Forbes).
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New Jobless Claims Hit Pandemic Level After 11 Million Americans Are Disabled from Federal Unemployment Benefits (Forbes).