New state unemployment claims surged last week for the first time in nearly four months, disturbing evidence that the struggling economy is receding at a time when coronavirus cases are on the rise.
After an avalanche of claims as the pandemic closed businesses in early spring, weekly jobless claims fell dramatically before crushing in June. But on Thursday, the Labor Department reported more than 1.4 million new applications for state benefits last week, compared to approximately 1.3 million in the previous two weeks.
Another 975,000 unemployed workers applied for benefits through a federal emergency program, also an increase. Unlike the number of state claims, that number is not seasonally adjusted.
The claims escalate just as a federal supplement of $ 600 a week for unemployment benefits will expire and Republican infighting has prevented the party from submitting a proposal for additional aid, let alone negotiating with Democrats on a law.
Disappointing Labor Department news followed a Census Bureau survey that showed four million fewer people were employed last week than the week before. It was the fourth consecutive decline, suggesting that almost all of the job gains since mid-May had been erased.
“At this stage, you are seeing all the wrong elements for recovery,” said Gregory Daco, chief economist at Oxford Economics in the United States. “A deteriorating health situation, a weakened labor market, and a smoother path to demand.”
Daco said the rush to reopen in many states had been counterproductive, contributing to the increased virus burden, particularly in the south and west, forcing companies to close again.
“I am increasingly afraid that we will see net payrolls in July that will show a real decline” when the next monthly jobs report is released, he added.
About 30 million people, about one in five American workers, are making unemployment benefits. Without an action by Congress to extend the weekly federal supplement, the unemployed will be left with less money to pay for food, medical care, rent and other bills. The federal Salary Protection Program, which provided small businesses with emergency loans that saved many workers from layoffs, is also coming to an end.
The stubborn rate of new unemployment claims “suggests that the nature of the recession has changed from the start,” said Ernie Tedeschi, policy economist at equity research firm Evercore ISI. In addition to reflecting renewed closings, he said, setbacks on the labor front may indicate something more fundamental.
“It may be that companies are going through their first line of credit,” he said, “and now they are faced with the music of an economy that has recovered somewhat but not sufficiently.”
In that case, temporary business closings and layoffs would increasingly become permanent.
On Thursday, the owner of Ann Taylor and Lane Bryant became the last in a series of large retailers to file for bankruptcy. It announced that 1,600 of its 2,800 stores nationwide would be closed.
Wieden + Kennedy, an advertising agency that has worked with clients such as McDonald’s, Ford and Procter & Gamble, said this week that it had laid off 11 percent of its workforce after cutting expenses and cutting executive salaries.
“We negotiated this as long as we could, but W + K and Covid-19 have come to a standstill,” the company said in a statement. “How long this will last seems to be an open question, so we have had to make some difficult decisions.”
During the worst of the last recession, weekly unemployment insurance claims never exceeded 700,000. Since mid-March, new state claims have not yet fallen below one million. States have been reducing the number of backlogs, but delays persist in some places.
Behnaz Mansouri, a lawyer for the Washington State Unemployment Bill, said her office still had an average of 200 phone calls per week from people who had not received benefits after waiting months, or had been inexplicably cut off.
There has been slow progress recently, he said. Several people who appealed a decision in March, April, and May are beginning to be called for hearings. The workers who have waited the longest, Mansouri said, are often those who have disabilities or do not speak English well.
In Oklahoma, hundreds of frustrated workers camped overnight, hoping to fix delays with their unemployment claims in one of the statewide large-scale prosecution sessions. And in Texas, applicants have turned to the state’s Workforce Commission page on Facebook to complain that they were unable to contact the agency despite calling hundreds of times.
Daniella Knight said her husband, Nicholas, applied for unemployment benefits in Virginia when he was fired in June from his job as a litigation data analyst, and “we have not received a dollar.”
Even before this setback, “we were barely making it,” said Knight, who lives in Alexandria. She had been working part-time at a property management company during the day while her husband cared for their three children, ages 3, 5, and 9. During her 4 pm to midnight shift, she took over the housework. After kissing the kids on a good night, she worked her second job as a pediatric sleep consultant.
Mrs. Knight called it “parenting.” But she endured exhaustion and stress so they could save enough to stop renting and buying a home with more than one bathroom.
The coronavirus pandemic added full-time home schooling to its burden. He stopped going to the small property management office during the day to avoid contagion, instead driving there at night when it was less crowded or empty.
“Mom and Dad were at the end of our ropes, more than exhausted,” he said. “I started having panic attacks.”
Her husband recently found another job, working for the government, but she has to wait at least six to eight weeks to get her security clearance.
“We still have to pay our bills, our utilities, our rent, everything,” said Knight. The monthly cost of their medical care is only $ 1,600, which they had to take advantage of their savings to pay. They hope that unemployment benefits will come soon. “We can’t go another two months without that,” he said.
The pain of job loss can be found in every corner of the country, but black men have had particular difficulties, said Peter Q. Blair, co-director of the Workforce Project at the Harvard Graduate School of Education.
The government employment report in June showed that while unemployment for all other groups decreased since May, the rate for African-American men over the age of 20 increased to 15.8 percent from 15.3 percent.
“It is important that we look at how this crisis is having a disparate effect on the African American community, particularly on black men,” he said.
And while the overall unemployment rate fell in June to 11.1 percent from a high of 14.7 percent in April, troubling weaknesses are becoming more prominent.
“Increasing unemployment will certainly hamper economic recovery, especially if Congress does not extend the fringe benefits that were part of the CARES Act,” said Carl Tannenbaum, chief economist at the Northern Trust.
Passed in late March, the legislation created a temporary federal unemployment program, Pandemic Unemployment Assistance, to cover freelancers, part-time workers, and others who do not qualify for regular state unemployment aid. She extended unemployment benefits for an additional 13 weeks for state beneficiaries who exhausted their aid allocation. And it helped unemployed workers survive the cash crisis by approving a weekly benefit of $ 600, a supplement that essentially expires on Saturday.
That extra money “provided critical support in recent months,” said Rubeela Farooqi, chief US economist at High Frequency Economics. Such support, even at a reduced level, “is going to be increasingly important in the future,” he said.
Ben Casselman and Tiffany Hsu contributed reports.
