U.S. weekly jobless claims unexpectedly rise

WASHINGTON (Reuters) – The number of Americans filing first-time applications for unemployment benefits unexpectedly rose last week, but the labor market is steadily recovering as additional fiscal stimulus and falling COVID-19 cases allow more services businesses to reopen.

Initial claims for state unemployment benefits totaled a seasonally adjusted 861,000 for the week ended Feb. 13, compared to 848,000 in the prior week, the Labor Department said on Thursday. Economists polled by Reuters had forecast 765,000 applications in the latest week.

Part of the increase in claims could be related to the temporary closure of automobile plants beginning last week due to a global semiconductor chip shortage. General Motors announced it would take down production entirely at its Fairfax plant in Kansas City during the week of Feb. 8.

Ford Motor has reduced shifts at its Dearborn truck plant and Kansas City assembly plant.

Claims have dropped from a record 6.867 million last March when the pandemic hit the United States. Though they are stuck above their 665,000 peak during the 2007-09 Great Recession, there is reason to be cautiously optimistic that the labor market recovery will gain traction in the spring.

Coronavirus infections and hospitalization rates have been declining since mid-January. Government data on Wednesday showed retail sales increasing by the most in seven months in January.

In addition, the U.S. Congress is considering President Joe Biden’s massive $1.9 trillion recovery package. That would be on top of nearly $900 billion in additional fiscal stimulus provided by the government at the end of December.

Minutes of the Federal Reserve’s Jan 26-27 policy meeting published on Wednesday showed most Fed officials “anticipated continued progress in vaccinations would lead to a sizable boost in economic activity.”

Last week’s claims data covered the period during which the government surveyed businesses for the nonfarm portion of February’s employment report. Claims, however, have not provided a good signal on job growth because of the economic shock caused by the pandemic.

The economy created 49,000 jobs in January after shedding 227,000 in December, the first drop in payrolls in eight months.

About 12.3 million of the 22.2 million jobs lost during the pandemic have been recovered. The Congressional Budget Office has estimated employment would not return to its pre-pandemic level before 2024.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)

U.S. labor market struggling, but light at the end of tunnel

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new applications for unemployment benefits fell slightly last week as the labor market continued to tread water, but a drop in new COVID-19 cases has raised cautious optimism that momentum could pick up by the spring.

The weekly unemployment claims report from the Labor Department on Thursday, the most timely data on the economy’s health, also highlighted labor market scarring, with over 20 million people collecting unemployment checks in late January.

“Claims remain stuck at painfully high levels,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia. “But we are seeing hopeful signs that claims will begin meaningful declines in the next month or two.”

Initial claims for state unemployment benefits slipped 19,000 to a seasonally adjusted 793,000 for the week ended Feb. 6. Data for the prior week was revised to show 33,000 more claims received than previously reported. Economists polled by Reuters had forecast 757,000 applications for the latest week.

Unadjusted claims decreased 36,534 to 813,145 last week. There were notable jumps in filings in California and Ohio. Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state programs, 1.148 million people filed claims last week.

Claims are stuck in the upper end of their 711,000-842,000 band between October and November. They remain above their 665,000 peak during the 2007-2009 Great Recession, though they are below the record 6.867 million reported last March when the pandemic hit the United States.

The labor market recovery has stalled in recent months as the country battled a resurgence in coronavirus infections, which ravaged restaurants and other consumer-facing businesses. The government reported last Friday that the economy created only 49,000 jobs in January after losing 227,000 in December.

Labor market woes strengthen the case for President Joe Biden’s proposed $1.9 trillion recovery package, which is under consideration in the U.S. Congress. The government provided nearly $900 billion in additional pandemic relief in late December. Republican lawmakers are opposing the planned massive fiscal stimulus due to concerns about the swelling national debt.

Stocks on Wall Street were trading higher. The dollar was steady against a basket of currencies. U.S. Treasury prices were mostly lower.

LONG BOUTS OF UNEMPLOYMENT

But there are glimmers of hope on the horizon. Reported new coronavirus cases in the United States dropped 25% last week, the biggest fall since the pandemic hit the nation. Infections have now fallen for four consecutive weeks, according to a Reuters analysis of state and county reports.

Should the trend continue and the distribution of vaccines broaden out, that, together with additional stimulus, could allow more businesses to reopen. There are signs that businesses are testing the waters. Temporary help jobs, a segment normally considered a harbinger of future hiring, jumped in January.

“Temporary and contract jobs are running slightly ahead of where they were the same time a year ago,” said Richard Wahlquist, chief executive officer at the American Staffing Association.

For now, the slack in the labor market remains immense. The claims report showed that people receiving benefits after an initial week of aid fell 145,000 to 4.545 million in the week ended Jan. 30. But the decline in the so-called continuing claims was mostly due to people exhausting their eligibility for benefits, limited to 26 weeks in most states.

At least 4.778 million people were on extended benefits during the week ended Jan. 23, up 1.2 million from the prior period. These benefits, which are funded by the government, will expire in mid-March if Congress does not pass the Biden administration’s relief package.

Another 1.653 million were on a state program for those who have exhausted their initial six months of aid. That meant 6.4 million people have been unemployed for more than six months.

“This is by the far the highest we have seen at any point during this crisis,” said AnnElizabeth Konkel, an economist at Indeed Hiring Lab. “Long-term joblessness is happening right now and is a very real challenge for the recovery.”

About 20.435 million people were receiving benefits under all programs during that period, an increase of 2.6 million from mid-January. The surge partly reflected the extension of government-funded benefits in late December, and underscored the widespread nature of unemployment.

“The unemployed are having a difficult time reentering the labor force, and this highlights the need for additional federal aid,” said Scott Anderson, chief economist at Bank of the West in San Francisco.

The economy has recovered 12.3 million of the 22.2 million jobs lost during the pandemic. The Congressional Budget Office has estimated employment would not return to its pre-pandemic level before 2024.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Fed’s Powell calls for broad national drive to full employment

By Howard Schneider and Ann Saphir

WASHINGTON (Reuters) – Invoking post-World War II efforts to reach full employment and pledging continued loose monetary policy to help the process, Federal Reserve Chair Jerome Powell made a broad call Wednesday for a “society-wide commitment” to get Americans back to work, particularly minorities and those ousted from lower-paying jobs during the pandemic.

“Given the number of people who have lost their jobs and the likelihood that some will struggle to find work in the post-pandemic economy, achieving and sustaining maximum employment will require more than supportive monetary policy,” Powell said in remarks to the Economic Club of New York. “It will require a society-wide commitment, with contributions from across government and the private sector.”

While the Fed has already promised that borrowing costs for companies and households will be kept low as the economy recovers, Powell’s remarks spoke to the need for a more comprehensive approach to end the jobs crisis that followed the onset of the coronavirus last spring. In scope and approach, including a call for long-term investment, the remarks aligned closely with the sort of proposals being discussed by President Joe Biden and his Treasury Secretary and former Fed chair Janet Yellen.

The United States remains about 9 million jobs short of where it was a year ago.

“Fully realizing the benefits of a strong labor market will take continued support from both near-term policy and longer-run investments so that all those seeking jobs have the skills and opportunities that will enable them to contribute to, and share in, the benefits of prosperity,” Powell said.

His remarks come as the Biden administration pushes a $1.9 trillion emergency spending bill through Congress, while also laying plans for a longer-term infrastructure effort that some analysts expect will also be in the trillions of dollars.

Though the Fed has no direct say over how the federal government spends money or how much it raises, central bank policy does influence the interest rate the government pays and thus the cost particularly of longer-term investments.

During the pandemic, Fed policymakers have generally set concerns about the level of federal debt to the side and focused more on the economy’s immediate needs.

Powell on Wednesday cemented that stance, noting that after World War II, as the economy transitioned from wartime and needed to absorb millions of returning soldiers in the labor force, the Employment Act of 1946 committed the government “to use all practicable means” to see that anyone willing and able to work can find “useful employment.”

“At present, we are a long way from such a labor market,” he said.

(Reporting by Howard Schneider and Ann Saphir; Editing by Andrea Ricci)

U.S. job openings edge up in December, hiring declines

WASHINGTON (Reuters) – U.S. job openings increased marginally in December while hiring declined, pointing to a labor market that was treading water amid a raging COVID-19 pandemic.

Job openings, a measure of labor demand, rose to 6.65 million on the last day of December from 6.572 million in the previous month, the Labor Department said on Tuesday in its monthly Job Openings and Labor Turnover Survey, or JOLTS report. The job openings rate ticked up to 4.5% from 4.4% in November.

Hiring dropped to 5.54 million from 5.94 million in November. The hiring rate declined to 3.9% from 4.2% in November. Layoffs decreased to 1.81 million in December from 2.056 million in the prior month. That lowered the layoffs rate to 1.3% from 1.4% in November.

The JOLTS report followed on the heels of news last Friday that the economy created only 49,000 jobs in January after shedding 227,000 jobs in December. Employment is 9.9 million jobs below its peak in February 2020.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. private hiring rebounds solidly in January

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. private payrolls rebounded more than expected in January, suggesting the labor market recovery was back on track after the economy shed jobs in December as soaring COVID-19 infections hurt operations in the leisure and hospitality industry.

The ADP National Employment Report on Wednesday showed broad gains in hiring last month, though the pace was half of the monthly average job growth in the last six months of 2020. The stronger-than-expected rise in hiring was likely driven by the nearly $900 billion in additional pandemic relief provided by the government in late December.

“Recovery in payrolls is ongoing, albeit at a slow pace,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. “However, contact-facing businesses continue to face downside risks from virus-related restrictions.”

Private payrolls increased by 174,000 jobs last month after dropping by 78,000 in December. Economists polled by Reuters had forecast private payrolls would rebound by 49,000 in January.

The ADP report is jointly developed with Moody’s Analytics.

Goods producers added 19,000 jobs in January, with employment in the construction industry rising 18,000. Manufacturing payrolls gained only 1,000. Hiring in the services sector rebounded by 156,000 jobs after falling 73,000 in December. The leisure and hospitality industry added 35,000 jobs after shedding 79,000 positions in December.

January was the worst month of the coronavirus pandemic since it started in the United States, according to data from Johns Hopkins University, forcing consumers to hunker down.

The bounce back in hiring last month as authorities started to ease restrictions on businesses has offered hope of faster job growth in the months ahead as the boost from recent stimulus package fully kicks in and the vaccines rollout speeds up.

“The rebounds suggest that demand rebounded quickly once the latest coronavirus wave passed its peak,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

U.S. stocks opened higher after strong quarterly results from Alphabet and Amazon, and hopes of more stimulus. The dollar was steady against a basket of currencies. U.S. Treasury prices were lower.

SPOTTY RECORD

President Joe Biden has unveiled a recovery plan worth $1.9 trillion, though resistance from some lawmakers worried about the ballooning national debt could see the package trimmed. The Biden administration has pledged to speed up and simplify the distribution of vaccines.

Moody’s Analytics chief economist Mark Zandi said vaccines and fiscal stimulus could help to spur faster job growth.

The ADP report was published ahead of the government’s closely watched, and comprehensive, monthly employment report on Friday. Despite the solid ADP number, economists did not change their estimates for January nonfarm payrolls, noting its spotty record predicting the private payrolls count in the government’s employment report.

“We don’t think that the ADP report gives a very reliable signal about the Labor Department data,” said Daniel Silver, an economist at JPMorgan in New York.

According to a Reuters poll of economists payrolls likely increased by 50,000 jobs in January after declining by 140,000 in December, the first drop in employment in eight months.

Expectations for a rebound in hiring were bolstered by a report on Monday from the Institute for Supply Management showing that manufacturers hired more workers in January, though a flare-up in COVID-19 infections caused labor shortages at factories and their suppliers.

But the Conference Board’s survey last week showed consumers’ perceptions of labor market conditions deteriorated further in January.

The economy has recouped 12.5 million of the 22.2 million jobs lost in March and April. The Congressional Budget Office estimated on Monday that employment would not return to its pre-pandemic level before 2024.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)

U.S. labor market gradually healing; housing, manufacturing power ahead

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new applications for unemployment benefits decreased modestly last week as the COVID-19 pandemic tears through the nation, raising the risk that the economy shed jobs for a second straight month in January.

Despite the labor market woes, the economy remains anchored by strong manufacturing and housing sectors. Other data on Thursday showed homebuilding and permits for future residential construction surged in December to levels last seen in 2006. Factory activity in the mid-Atlantic region accelerated this month, with manufacturers reporting a boom in new orders.

The services sector has borne the brunt of the coronavirus crisis, disproportionately impacting lower-wage earners, who tend to be women and minorities. Addressing the so-called K-shaped recovery, where better-paid workers are doing well while lower-paid workers are losing out, is one of the major challenges confronting President Joe Biden and his new administration.

Initial claims for state unemployment fell 26,000 to a seasonally adjusted 900,000 for the week ended Jan. 16, the Labor Department said. Economists polled by Reuters had forecast 910,000 applications in the latest week.

Unadjusted claims dropped 151,303 to 960,668 last week. Economists prefer the unadjusted number because of earlier difficulties adjusting the claims data for seasonal fluctuations due to the economic shock caused by the pandemic. Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs 1.4 million people filed claims last week.

Out-of-control coronavirus infections are disrupting operations at businesses like restaurants, gyms and other establishments where crowds tend to gather, reducing hours for many workers and pushing others out of employment.

Consumers are also hunkering down at home, leading to a weakening in demand. COVID-19 has infected more than 24 million people, with the death toll exceeding 400,000 since the pandemic started in the United States.

U.S. stocks opened higher as investors bet on more pandemic relief and speedy vaccine rollouts under the Biden administration. The dollar fell against a basket of currencies. U.S. Treasury prices were lower.

Some of the elevation in claims reflects people re-applying for benefits following the government’s recent renewal of a $300 unemployment supplement until March 14 as part of the nearly $900 billion in additional fiscal stimulus. Programs for the self-employed, gig workers as well as those who have exhausted their benefits were also extended.

Claims data is also difficult to adjust for seasonal fluctuations at the start of the year, a task that has been made even harder given the shock caused by the coronavirus.

MOMENTUM WANING

Nevertheless, recent data have shown the labor market recovery has stalled. The claims data covered the week during which the government surveyed establishments for the nonfarm payrolls component of January’s employment report. Claims were little changed between the December and January survey period.

The economy shed 140,000 jobs in December, the first job losses since April when authorities throughout the country enforced stay-at-home measures to slow the spread of the virus. Retail sales fell for a third straight month in December.

Though jobless claims have dropped from a record 6.867 million in March, they remain above their 665,000 peak during the 2007-09 Great Recession.

The claims report showed the number of people receiving benefits after an initial week of aid decreased 127,000 to 5.054 million during the week ending Jan. 9.

About 16 million people were on unemployment benefits under all programs at the start of the year. The economy has recovered 12.4 million of the 22.2 million jobs lost in March and April. Economists say it could take several years for the labor market to recover from the pandemic.

In a separate report on Thursday, the Commerce Department said housing starts jumped 5.8% to a seasonally adjusted annual rate of 1.669 million units last month, the highest level since September 2006. Economists had forecast starts would rise to a rate of 1.560 million units in December. Starts totaled 1.380 million in 2020, up 7.0% from 2019.

Permits for future homebuilding accelerated 4.5% to a rate of 1.709 million units in December, the highest since August 2006. Permits, which typically lead starts by one to two months, totaled 1.452 million last year, a 4.8% increase from 2019.

The housing market is being underpinned by cheaper mortgages and an exodus from city centers to suburbs and other low-density areas as companies allow employees to work from home and schools shift to online classes because of the pandemic. About 23.7% of the labor force is working from home.

A third report from the Philadelphia Federal Reserve showed its business conditions index soared to a reading of 26.5 this month from 9.1 in December. A measure of new orders at factories in the region that covers eastern Pennsylvania, southern New Jersey and Delaware, vaulted to a reading of 30.0 from 1.9 in December.

Factory employment measures also improved. While manufacturers reported paying more for raw materials, they were also able to increase prices for their goods. Manufacturers were upbeat about capital investment plans in the six months ahead.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

COVID-19, renewed benefits boost U.S. weekly jobless claims

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing first-time applications for unemployment benefits surged last week, confirming a weakening in labor market conditions as a worsening COVID-19 pandemic disrupts operations at restaurants and other businesses.

The larger-than-expected increase in weekly unemployment claims reported by the Labor Department on Thursday was seen by some economists as driven by the recent renewal of supplemental jobless benefits, but nonetheless raised the risk of further job losses in January after nonfarm payrolls slumped in December for the first time in eight months.

“The economy clearly needs additional support from Washington because right now rising jobless claims tells us the labor market recovery has stalled and the direction is full-tilt down,” said Chris Rupkey, chief economist at MUFG in New York.

Initial claims for state unemployment benefits increased 181,000 to a seasonally adjusted 965,000 for the week ended Jan. 9, the highest since late August. Economists polled by Reuters had forecast 795,000 applications in the latest week.

Unadjusted claims shot up 231,335 to 1.151 million last week. Economists prefer the unadjusted number because of earlier difficulties adjusting the claims data for seasonal fluctuations due to the economic shock caused by the pandemic. Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs 1.4 million people filed claims last week.

U.S. stocks opened higher as investors awaited details of Biden’s rescue plan. The dollar rose against a basket of currencies. U.S. Treasury prices were lower.

STRICTER MEASURES

The surge in claims last week also likely reflected reapplications for benefits following the government’s renewal of a $300 unemployment supplement until March 14 as part of the latest stimulus package. Government-funded programs for the self-employed, gig workers and others who do not qualify for the state unemployment programs as well as those who have exhausted their benefits were also extended.

“Not all individuals eligible for unemployment assistance actually claim benefits, and the supplementary payments add an incentive to file for benefits,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York.

Authorities in many states have banned indoor dining to slow the spread of the coronavirus. The economy shed jobs in December for the first time in eight months.

The Federal Reserve’s Beige Book report of anecdotal information on business activity collected from contacts nationwide in early January showed on Wednesday that “contacts in the leisure and hospitality sectors reported renewed employment cuts due to stricter containment measures.”

The central bank also noted that the resurgence in the coronavirus was causing staff shortages in the manufacturing, construction and transportations sectors. The virus has infected more than 22.5 million people in the United States and killed over 376,188, the most of any country.

Though jobless claims have dropped from a record 6.867 million in March, they remain above their 665,000 peak during the 2007-09 Great Recession. Economists say it could take several years for the labor market to recover from the pandemic.

The claims report showed the number of people receiving benefits after an initial week of aid increased 199,000 to 5.271 million during the week ending Jan. 2. At least 18.4 million were on unemployment benefits on all programs in late December.

Labor market stress could curb inflation amid signs of rising price pressures. In a separate report on Thursday, the Labor Department said import prices jumped 0.9% in December after rising 0.2% in November. Import prices were boosted by higher prices for energy products and recent dollar weakness.

Economists had forecast import prices, which exclude tariffs, accelerating 0.7% in December. In the 12 months through December, import prices slipped 0.3% after dropping 1.0% in November.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

U.S. job openings fall in November; layoffs rise

WASHINGTON (Reuters) – U.S. job openings fell in November, while layoffs mounted at restaurants and hotels amid rampant COVID-19 infections, supporting views that the labor market recovery from the pandemic was stalling.

Job openings, a measure of labor demand, dropped 105,000 to 6.527 million on the last day of November, the Labor Department said on Tuesday in its monthly Job Openings and Labor Turnover Survey, or JOLTS. Vacancies have dropped from as high as 7.012 million in January.

The job openings rate slipped to 4.4% from 4.5% in October. Layoffs increased 295,000 to nearly 2.0 million. That lifted the layoffs rate to 1.4% from 1.2% in October. Layoffs were led by the accommodation and food services industry, which shed 263,000 workers. A resurgence in coronavirus cases has led to widespread curbs on businesses, with restaurants and bars hardest hit.

There were 42,000 job losses in the healthcare and social assistance sector. State and local governments, which are experiencing tight budgets because of the pandemic, laid off 21,000 workers.

Hiring was little changed at 5.979 million. The hiring rate was steady at 4.2%.

The JOLTS report followed on the heels of news last Friday that the economy shed 140,000 jobs in December, the first decline in nonfarm payrolls since April, after adding 336,000 positions in November. The economy has recovered 12.4 million of the 22.2 million jobs lost in March and April.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

U.S. weekly jobless claims rise as COVID-19 infections surge

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing first-time claims for jobless benefits increased further last week, suggesting that an explosion in new COVID-19 infections and business restrictions were boosting layoffs and undermining the labor market recovery.

Other data on Wednesday showed business spending on capital remained solid at the start of the fourth quarter, though momentum has cooled from the prior months. The economy is shifting into slower gear as the boost from more than $3 trillion in government coronavirus relief ends.

“There is a two-tier recovery from the pandemic recession where the top of society continues to spend as normal while the bottom-half of the country sits in long lines at food banks with the opportunities for employment few and far between,” said Chris Rupkey, chief economist at MUFG in New York.

Initial claims for state unemployment benefits increased 30,000 to a seasonally adjusted 778,000 for the week ended Nov. 21, the Labor Department said on Wednesday. It was the second straight weekly increase in claims. Economists polled by Reuters had forecast 730,000 applications in the latest week.

The weekly claims report, the most timely data on the economy’s health, was published a day early because of Thursday’s Thanksgiving Day holiday.

Unadjusted claims jumped 78,372 to 827,710 last week. Economists prefer the unadjusted number because of earlier difficulties adjusting the claims data for seasonal fluctuations due to the economic shock caused by the pandemic.

Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs, 1.14 million people filed claims last week. There were at least 20.5 million people collecting unemployment benefits in early November.

The United States has been slammed by a fresh wave of coronavirus infections, with daily cases exceeding 100,000 since early November. More than 12 million people have been infected in the country, according to a Reuters tally of official data.

The respiratory illness has killed more than 257,000 Americans and hospitalizations are soaring, prompting state and local governments to reimpose a host of restrictions on social and economic life in recent weeks, which could keep claims above their 665,000 peak seen during the 2007-09 Great Recession.

U.S. stocks were mixed in early trade. The dollar dipped against a basket of currencies. U.S. Treasury prices rose.

RECORD THIRD-QUARTER GROWTH

Unemployment claims dropped from a record 6.867 million in March as about 80% of the people temporarily laid off in March and April were rehired, accounting for most of the rebound in job growth over the last six months.

That improvement, which spilled over to the broader economy through robust consumer spending, was spurred by the fiscal stimulus. In a separate report on Wednesday, the Commerce Department confirmed the economy’s historic pace of expansion in the third quarter.

Gross domestic product grew at an unrevised 33.1% annualized rate, the government said in its second estimate of third-quarter output. The economy contracted at a 31.4% rate in the second quarter, the deepest since the government started keeping records in 1947.

(Reporting By Lucia Mutikani; additional reporting by Dan Burns, Editing by Chizu Nomiyama)

Persistently high U.S. weekly jobless claims point to labor market scarring

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new claims for jobless benefits rose to a two-month high last week, stoking fears the COVID-19 pandemic was inflicting lasting damage to the labor market.

The weekly unemployment claims report from the Labor Department on Thursday, the most timely data on the economy’s health, also showed at least 25 million were on jobless benefits at the end of September. It reinforced views the economy’s recovery from the recession, which started in February, was slowing and in urgent need of another government rescue package.

The economic hardship wrought by the coronavirus crisis is a major hurdle to President Donald Trump’s chances of getting a second term in the White House when Americans go to the polls on Nov. 3. Former Vice President Joe Biden, the Democratic Party’s candidate, has blamed the Trump administration’s handling of the pandemic for the worst economic turmoil in at least 73 years.

“The increase in initial claims is disturbing,” said Chris Low, chief economist at FHN in New York. “It is difficult to see it and not think the recovery is vulnerable.”

Initial claims for state unemployment benefits increased 53,000 to a seasonally adjusted 898,000 for the week ended Oct. 10. Data for the prior week was revised to show 5,000 more applications received than previously reported.

Economists polled by Reuters had forecast 825,000 applications in the latest week. The surprise increase came even as California processed no claims. California, the most populous state in the nation, suspended the processing of new applications for two weeks in late September to combat fraud. It resumed accepting claims last Monday.

Unadjusted claims rose 76,670 to 885,885 last week. Economists prefer the unadjusted number given earlier difficulties adjusting the claims data for seasonal fluctuations because of the economic shock caused by the pandemic. Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs, 1.3 million people filed claims last week.

Seven months into the pandemic in the United States, first-time claims remain well above their 665,000 peak during the 2007-09 Great Recession, though below a record 6.867 million in March. With new COVID-19 cases surging across the country and the White House and Congress struggling to agree on another rescue package for businesses and the unemployed, claims are likely to remain elevated.

Treasury Secretary Steven Mnuchin said on Thursday he would keep trying to reach a deal with House Speaker Nancy Pelosi, a Democrat, before next month’s election.

Stocks on Wall Street were lower. The dollar gained versus a basket of currencies. U.S. Treasury prices rose.

MILLIONS EXHAUST BENEFITS

About 3.8 million people had permanently lost their jobs in September, with another 2.4 million unemployed for more than six months. Economists fear those numbers could swell.

Though the claims report showed a decline in the number of people on unemployment rolls in early October, economists said that was because many people had exhausted their eligibility for benefits, which are limited to six months in most states.

The number of people receiving benefits after an initial week of aid declined 1.165 million to 10.018 million in the week ending Oct. 3.

About 2.8 million workers filed for extended unemployment benefits in the week ending Sept. 26, up 818,054 from the prior week. That was the largest weekly gain since the program’s launch last spring. These benefits are set to expire on Dec. 31.

Tens of thousands of airline workers have been furloughed. State and local government budgets have been crushed by the pandemic, leading to layoffs that are expected to escalate without help from the federal government.

“Risks to the labor market outlook are weighted heavily to the downside,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “The increased spread of the virus across much of the country could result in an even larger pullback in business activity than expected.”

Though economic activity rebounded in the third quarter because of fiscal stimulus, the stubbornly high jobless claims suggest momentum ebbed heading into the fourth quarter.

Other reports on Thursday showed mixed fortunes for regional manufacturing in October. A survey from the New York Federal Reserve showed its business conditions index fell seven points to a reading of 10.5 this month. Companies reported continued gains in new orders and shipments, though unfilled orders maintained their decline. Factory employment rose modestly, but the average workweek increased significantly.

Separately, the Philadelphia Fed said its business conditions index jumped to a reading of 32.3 from 15.0 in September. Measures of new orders and shipments at factories in the region that covers eastern Pennsylvania, southern New Jersey and Delaware rose. A gauge of factory employment fell, but manufacturers increased hours for workers.

Third-quarter GDP growth estimates are topping a 32% annualized rate. The economy contracted at a 31.4% pace in the second quarter, the deepest decline since the government started keeping records in 1947. Growth estimates for the fourth quarter have been cut to as low as a 2.5% rate from above a 10% pace.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)