Tag Archives: labor market

U.S. weekly jobless claims drop to four-month low

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new claims for jobless benefits dropped to a four-month low last week as an improving public health environment allows more segments of the economy to reopen, putting the labor market recovery back on track.

Still, a full recovery from the deep scars inflicted by the COVID-19 pandemic will probably take years, with the weekly unemployment claims report from the Labor Department on Thursday also showing a whopping 20.1 million Americans collecting unemployment checks in late February.

“The economy and the labor market are entering the next phase of the rebound, supported by a ramping up of vaccinations and declining infections that will allow for a resumption of activity,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.

Initial claims for state unemployment benefits decreased 42,000 to a seasonally adjusted 712,000 for the week ended March 6, the lowest level since early November. Data for the prior week was revised to show 9,000 more applications received than previously reported.

Economists polled by Reuters had forecast 725,000 applications in the latest week.

Unadjusted claims dropped 47,170 to 709,458 last week, amid declines in Texas, New York and Mississippi, where claims had been boosted in the prior period by harsh weather. Claims rose in Ohio, which has been plagued by fraudulent applications.

Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state programs, 1.2 million people filed claims last week.

U.S. stocks opened higher. The dollar fell against a basket of currencies. U.S. Treasury prices were mixed.

INFECTIONS FALLING

New coronavirus infections have dropped for eight straight weeks, declining 12% last week, according to a Reuters analysis of state, county and CDC data. Vaccinations jumped to a record 2.2 million shots per day and virus-related deaths fell 18%.

That, together with nearly $900 billion in additional pandemic relief money advanced by the government in late December, fired up consumer spending and hiring in February after declining in December.

Domestic demand is expected to surge in the months ahead, after Congress approved President Joe Biden’s $1.9 trillion recovery package, which will send fresh aid to small businesses as well as one-time $1,400 checks to mostly lower- and middle-income households. It will also extend a government-funded $300 weekly unemployment supplement through Sept. 6.

Jobless claims have been slow to decline with the improvement in economic activity and public health because of issues ranging from fraudulent filings and backlogs to recent winter storms in the South.

Though claims have dropped from a record 6.867 million in March 2020 when the pandemic hit the United States just more than a year ago, they are above their 665,000 peak during the 2007-09 Great Recession and could remain elevated because of the expanded unemployment benefits. In a well-functioning labor market, claims are normally in a 200,000 to 250,000 range.

“There is some risk in our view though that expanded unemployment, with benefits of an additional $300 per week, could keep the level of claims for unemployment benefits more elevated this year, as some workers could earn more on unemployment than in their previous jobs,” said Andrew Hollenhorst, an economist at Citigroup in New York.

Regular state unemployment benefits averaged about $346 per week in January. Together with the weekly $300 subsidy, they add up to $646 per week or over $15 per hour for a 40-hour week.

The federal minimum wage is $7.25 per hour, though some states have higher rates.

The claims report also showed the number of people receiving benefits after an initial week of aid declined 193,000 to 4.144 million during the week ended Feb 27. The decrease largely reflected people exhausting their eligibility for benefits, limited to 26 weeks in most states.

About 5.455 million people were on the government-funded extended benefits program during the week ended Feb. 20, up 986,351 from the prior week. There number of people on unemployment benefits under all programs during that period increased by 2.087 million.

(Reporting by Lucia Mutikani; Editing by Paul Simao and Andrea Ricci)

Yellen says COVID-19 having ‘extremely unfair’ impact on women’s income, jobs

WASHINGTON (Reuters) – The COVID-19 pandemic has had an “extremely unfair” impact on the income and economic opportunities of women, U.S. Treasury Secretary Janet Yellen said on Monday, calling for long-term measures to improve labor market conditions for women.

Yellen, in a dialogue with International Monetary Fund chief Kristalina Georgieva, said it was critical to address the risk that the pandemic would leave permanent scars, reducing the prospects for women in the workplace and the economy.

She noted that women’s participation in the workforce was already lower in the United States before the pandemic than in Europe, another issue that needed to be addressed.

“I think it’s absolutely tragic, the impact that this crisis has had on women, especially low-skilled women and minorities,” Yellen said, noting that while people at the top of the economic scale had continued to do well, those nearer the bottom, who had already been struggling, had been hardest hit.

“It is an extremely unfair thing that’s happened,” Yellen said, noting that women as a group had experienced far greater job losses since they had been disproportionately represented in the service sector and many had dropped out of the labor force to care for children, who were out of school.

“We’re really concerned about scarring, permanent scarring, from this crisis,” she said, adding her hope that President Joe Biden’s $1.9 trillion relief bill would help get the labor market back on track this year or next.

The goal, she said, was to avoid the decade-long gap seen before the labor market recovered after the global financial crisis of 2008-2009.

As of January, women accounted for slightly more than half of the 10 million jobs lost during the coronavirus crisis, even though they typically make up a little less than half the U.S. work force.

More than 2.5 million women left the labor force between February 2020 and January of this year, compared to 1.8 million men.

In the longer-term, Yellen said it was critical to improve the conditions facing women in the labor market, including lack of benefits, paid leave for family emergencies and child care.

“These are things that we are going to address over time,” she said.

(Reporting by Andrea Shalal and David Lawder; Editing by Chizu Nomiyama and Andrea Ricci)

U.S. weekly jobless claims rise moderately; labor market regaining footing

WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits rose last week, likely boosted by brutal winter storms in the densely populated South in mid-February, though the labor market outlook is improving amid declining new COVID-19 cases.

Initial claims for state unemployment benefits totaled a seasonally adjusted 745,000 for the week ended Feb. 27, compared to 736,000 in the prior week, the Labor Department said on Thursday. Economists polled by Reuters had forecast 750,000 applications in the latest week.

Stormy weather in the South left large parts of Texas without power or water for days. The deep freeze shut oil production and refineries in Texas, the biggest producer of natural gas and oil in the United States.

The labor market has lagged the acceleration in overall economic activity, which has been driven by nearly $900 billion in additional pandemic relief provided by the government in late December. Consumer spending rebounded strongly in January as daily coronavirus cases and hospitalizations dropped sharply.

Though the pace of decline in infections has stalled, economists believe the labor market will accelerate in the spring and through summer, noting that vaccinations were increasing daily. A boost to hiring is also expected from President Joe Biden’s $1.9 trillion recovery plan, under consideration by Congress.

Weekly jobless claims have dropped from a record 6.867 million in March 2020 when the pandemic hit the United States a little more than a year ago. They, however, remain above their 665,000 peak during the 2007-09 Great Recession. In a well functioning labor market, claims are normally in a 200,000 to 250,000 range.

Last week’s claims data has no bearing on February’s employment report as it falls outside the period during which the government surveyed establishments and households. According to a Reuters poll of economists, the government will likely report on Friday that nonfarm payrolls increased by 180,000 jobs in February after rising only 49,000 in January.

Hopes for a pick-up in hiring last month were supported by a survey last week showing consumers’ perceptions of the labor market improved in February after deteriorating in January and December. In addition, a measure of manufacturing employment increased to a two-year high in February.

But those expectations were tempered by reports on Wednesday showing private employers hiring fewer-than-expected workers in February. Employment growth in the services industry retreated last month, with businesses reporting they were “unable to fill vacant positions with qualified applicants.”

The year-long COVID-19 pandemic is keeping some workers at home, fearful of accepting or returning to jobs that could expose them to the virus. These workers are now allowed to apply for government-funded unemployment benefits.

The Federal Reserve’s Beige Book report noted “continued difficulties attracting and retaining qualified workers” reported by many of the U.S. central bank’s contacts last month, with labor shortages “most acute among low-skill occupations and skilled trade positions.”

The Fed’s contacts cited the coronavirus, childcare, and unemployment benefits as factors behind the labor supply problem.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)

U.S. private payrolls miss expectations; cost pressures rising for businesses

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. private payrolls increased less than expected in February amid job losses in manufacturing and construction, suggesting the labor market was struggling to regain speed despite the nation’s improving public health picture.

Part of the labor market’s problems appear to be rooted in a shortage of workers. Other data on Wednesday showed job growth in the services industry retreated last month, with businesses reporting they were “unable to fill vacant positions with qualified applicants” and “need more resources to meet demand.”

The year-long COVID-19 pandemic is keeping some workers at home, fearful of accepting or returning to jobs that could expose them to the coronavirus. The data was published ahead of the government’s closely watched employment report on Friday, and could temper expectations for an acceleration in job growth in February. The ADP’s private payrolls report, however, has a poor track record predicting the private payrolls count in the government’s more comprehensive employment report.

“This is a disappointment given that the drop-off in coronavirus case numbers and the resulting lifting of containment measures should be giving the economy a bigger shot in the arm,” said Paul Ashworth, chief economist at Capital Economics in Toronto.

Private payrolls rose by 117,000 jobs last month after increasing 195,000 in January, the ADP National Employment Report showed. The report is jointly developed with Moody’s Analytics. Economists polled by Reuters had forecast private payrolls would increase by 177,000 jobs in February.

Construction employment fell by 3,000 jobs and manufacturing payrolls decreased 14,000. Hiring in the services sector increased by 131,000 jobs, with the leisure and hospitality industry adding 26,000 positions. Harsh weather in some parts of the country was also likely a factor holding back gains.

Still, the labor market has been slow to regain traction even as some restrictions on services businesses have been rolled back amid a drop in new COVID-19 infections and hospitalizations. Though the rate of decline in coronavirus cases has stalled, economists still believe the labor market will regain momentum in the spring and through summer.

In a separate report on Wednesday, the Institute for Supply Management (ISM) said its measure of services sector employment fell to a reading of 52.7 in February from 55.2 in January.

The lack of significant improvement in the labor market is also despite nearly $900 billion in additional pandemic relief provided by the government in late December, which boosted consumer spending and positioned the economy for faster growth in the first quarter.

Gross domestic product growth estimates for the first quarter have been raised to as high as a 10% annualized rate from as low as a 2.3% pace. The upgrades also reflect President Joe Biden’s $1.9 trillion recovery plan, under consideration by Congress. The economy grew at a 4.1% rate in the fourth quarter.

“Historically, employment lags GDP by a quarter or so,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania. “Everything from that (GDP) front looks good, we are expecting substantial job growth in the not-too-distant future.”

Stocks on Wall Street were mostly lower. The dollar rose against a basket of currencies. U.S. Treasury prices fell.

RISING COSTS

According to a Reuters poll of economists, the government will likely report on Friday that nonfarm payrolls increased by 180,000 jobs in February after rising only 49,000 in January.

Hopes for a pick-up in hiring last month were supported by a survey last week showing consumers’ perceptions of the labor market improved in February after deteriorating in January and December. In addition, a measure of manufacturing employment increased to a two-year high in February.

The retrenchment in services employment last month contributed to the ISM’s broader non-manufacturing activity index declining to a nine-month low of 55.3 in February from a reading of 58.7 in January. A reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of U.S. economic activity.

Economists had forecast the index unchanged at 58.7. The decline likely reflected brutal winter storms, which lashed Texas and parts of the populous South region in mid-February.

The lack of qualified workers at suppliers and manufacturers is creating bottlenecks in the supply chain, leaving businesses with high production costs. The survey’s measure of prices paid by services industries jumped to 71.8 last month, the highest reading since September 2008, from 64.2 in January.

It mirrored findings of the ISM’s manufacturing survey published on Monday and a surge in consumers’ near-term inflation expectations.

Inflation is expected to accelerate in the coming months in part as last year’s pandemic-driven weak readings drop out of the calculation. Economists are divided on whether the jump in price pressures will stick beyond the so-called base effects.

U.S. Treasury yields have risen, with investors betting that the Federal Reserve’s ultra-easy monetary policy stance and White House’s proposed massive stimulus will ignite inflation.

Many services businesses complained about supply delays and labor shortages. Wholesalers reported an “ongoing influx of price increases due to raw-material shortages.” Retailers said “price increases are occurring with more frequency,” while accommodation and food services noted suppliers were proposing “price increases that are above and beyond normal expectations.”

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

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)