New claims for state unemployment benefits sharply increased last week as the resurgent pandemic continued to batter the economy.
A total of 1.15 million workers filed initial claims for state unemployment benefits during the first full week of the new year, the Labor Department said. Another 284,000 claims were filed for Pandemic Unemployment Assistance, an emergency federal program for freelancers, part-time workers and others normally ineligible for state jobless benefits. Neither figure is seasonally adjusted. On a seasonally adjusted basis, new state claims totaled 965,000.
It was the first week since July in which the unadjusted number of new state claims exceeded one million. Before the pandemic, weekly filings typically totaled around 200,000.
Economists had been bracing for a fresh wave of claims as the virus battered the service industry. The government reported last week that the economy shed 140,000 jobs in December, the first drop in employment since last spring, with restaurants, bars and hotels recording steep losses.
“Today’s report shows that we’re in a deep economic hole, and we’re digging in the wrong direction,” said Daniel Zhao, senior economist with the career site Glassdoor. “The report obviously shows that the rise in claims is worse than expected, and there is reason to think that things are going to get worse before they are going to get better.”
The holidays may have temporarily depressed unemployment claims in previous weeks, with people delaying filing for benefits until the new year. But several economists expressed skepticism that filing delays were a major driver of the uptick in claims last week.
“I don’t think there’s any question that on the margin, there could be some unusual things going on,” said Mark Hamrick, senior economic analyst at Bankrate. “But we have to think also about the fact that these are not our grandfather’s unemployment lines — meaning much of this is done digitally. I think if one just tries to understand human nature, it doesn’t make a lot of sense that someone would be delaying a request for financial assistance when they’re out of work.”
More likely, economists say, is that the availability of a $300 federal supplement to other unemployment payments — part of the $900 billion stimulus package that President Trump signed into law last month — prompted an increase in demand for benefits.
The labor market has rebounded somewhat since the initial coronavirus wave in the spring. But of the 22 million jobs that disappeared, nearly 10 million remain lost.
“Compared to then, we are doing better,” said AnnElizabeth Konkel, an economist at the career site Indeed, referring to the spring. “But compared to the pre-Covid era, we still have so far to go.”
Still, economists and analysts see better times ahead. As more people are vaccinated, cases will begin to fall, which will ease restrictions on businesses and could lead to a resurgence in consumer activity, helping to revive the service industry.
Perhaps more immediately, President-elect Joseph R. Biden Jr. has pledged to put forward a stimulus package that would provide relief to individuals, small businesses, students, schools and local governments.