WASHINGTON (Reuters) – Weak demand is forcing American employers to lay off workers, keeping new claims for unemployment benefits extraordinarily high, even when companies have reopened, confirming views that the job market could take years to recover from the COVID-19 pandemic.
FILE PHOTO: People line up in front of a Kentucky Career Center hoping to find help with their unemployment claim in Frankfort, Kentucky, USA. USA June 18, 2020. REUTERS / Bryan Woolston
A resurgence in confirmed coronavirus cases across the country, related to the reopening of businesses, is also dampening prospects. Approximately 29 million people were cashing unemployment checks at the end of May.
Thursday’s weekly jobless claims report from the Labor Department, the most timely data on the economy’s health, is unlikely to show a big improvement, more than a month after many companies resumed operations after closing mid-year. March in an effort to curb the spread of the crisis. respiratory disease.
Companies are hiring, but others are cutting jobs at almost the same rate. The economy fell into recession in February.
“There were some companies that tried to maintain their workforce, waiting to see what would happen when the companies reopened,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. “Even when the economy is recovering, they don’t see much demand and decide that they don’t need as many workers.”
Initial claims for state unemployment benefits likely totaled 1.3 million seasonally adjusted for the week ended June 20, down from 1,508 million in the prior week, according to a survey of Reuters economists.
Claims have fallen from a record $ 6,867 million at the end of March, but the pace of decline has slowed and are still more than double its peak during the 2007-09 Great Recession.
From manufacturing to transportation, retail, and the entertainment and hospitality industries, companies are restructuring to adapt to a highly changed landscape, leading to layoffs and bankruptcies. State and local governments, whose budgets have been cut by the COVID-19 fight, are also cutting jobs.
Rising coronavirus infections in many parts of the country, including California, Texas, and Florida, are likely to hurt employment, as some people stay away from restaurants and other consumer-oriented establishments, even if businesses don’t close again.
“It looks like a bumpy ride,” said Josh Wright, chief economist at Wrightside Advisors in New York.
In a busy economic data calendar, other reports to be released on Thursday are expected to show a big pickup in orders for high-priced products in May and confirm that the US economy. USA It contracted at an annualized rate of 5% in the first quarter, the biggest contraction since the financial crisis more than a decade ago.
When second-quarter production is reported next month, the contraction rate could exceed 30%.
Thursday’s unemployment claims report is also expected to show a modest change in the unemployment charts. The number of people receiving benefits after an initial week of aid probably fell to 19.968 million in the week ending June 13 from 20.544 million in the previous week, according to the Reuters poll.
These so-called continuous claims are reported with a delay of one week. Continuing claims have dropped from a record $ 24.912 million in early May, and economists credit the government’s Paycheck Protection Program, part of a landmark fiscal package worth nearly $ 3 trillion, by granting loans to companies they can be partially forgiven if used for wages.
However, progress seems to have slowed. Continuous claims data will cover the week the government surveyed households for the June unemployment rate.
The measurement of the unemployment rate has been skewed since March by people who mistakenly classify themselves as “employed but absent from work.”
The Labor Department’s Bureau of Labor Statistics (BLS), which compiles the employment report, is working with the Census Bureau to correct this problem in future reports.
Without the misclassification problem, the unemployment rate would have been 16.3% in May instead of 13.3% and would have peaked at around 19.7% in April.
“At least so far, hiring companies are barely outnumbering laid-off companies,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania. “We may not see a significant decrease in the June unemployment rate. In fact, if BLS finally fixes its misclassification problem, we could see the rate increase posted in May. ”
Economists also say continued claims have likely stalled because some people who have returned to work have been rehired part-time. That would allow them to continue receiving benefits while still being on the payroll of the company.
The government has expanded eligibility for unemployment benefits to include independent and self-employed contractors who have been affected by the COVID-19 pandemic, including loss of employment, reduced hours and wages.
Part-time workers accounted for two-fifths of the 2.5 million increase in employment in May.
Lucia Mutikani’s report; Editing by Andrea Ricci