U.S. weekly jobless claims unexpectedly rise, but labor market improving

By Lucia Mutikani

WASHINGTON (Reuters) -The number of Americans filing new claims for unemployment benefits unexpectedly rose last week, but the increase likely understated the rapidly improving labor market conditions as more parts of the economy reopen and fiscal stimulus kicks in.

The second straight weekly increase in claims reported by the Labor Department on Thursday was at odds with reports this month showing the economy created 916,000 jobs in March, the most in seven months, and job openings increased to a two-year high in February.

“Our belief is that continued moves to reopen the economy will result in a solid further advance in payrolls in the April jobs report and that the claims data are likely not capturing the pace of improvement in the labor market,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

Initial claims for state unemployment benefits increased 16,000 to a seasonally adjusted 744,000 for the week ended April 3 compared to 728,000 in the prior week. Data for the prior week was revised to show 9,000 more applications received than previously reported.

Economists polled by Reuters had forecast 680,000 applications for the latest week. Though claims have dropped from a record 6.149 million in early April of 2020, they remain more than double their pre-pandemic level. In a healthy labor market, claims are normally in a range of 200,000 to 250,000.

Part of the elevation in claims is because of fraud, multiple filings and backlogs following the enhancement of the unemployment benefit programs.

The government is paying a weekly $300 unemployment supplement, as well as funding benefits for the self-employed, gig workers and others who do not qualify for the regular state unemployment insurance programs.

The weekly subsidy and the Pandemic Unemployment Assistance (PUA) program will run through Sept. 6.

Including the PUA program, 892,539 people filed claims last week, remaining below one million for a third straight week.

The increase in applications was led by California and New York. There were big drops in Alabama and Texas, as well as Ohio, which has been beset by fraudulent applications.

“The total number of filings for all unemployment insurance programs has remained stubbornly steady over the last few months despite net re-hiring in monthly employment reports,” said Veronica Clark, an economist at Citigroup in New York.

“This could partly be a reflection of more workers wanting to stay on unemployment benefits even if some return to work part-time given the greater size of payments.”

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

COMPANIES HIRING

The labor market has regained its footing after stumbling in December, thanks to the White House’s massive $1.9 trillion pandemic rescue package and an acceleration in the pace of COVID-19 vaccinations, which are allowing more services businesses to resume operations.

In the minutes of the Federal Reserve’s March 16-17 policy meeting released on Wednesday, U.S. central bank officials acknowledged the improvement in labor market conditions and “expected strong job gains to continue over coming months and into the medium term.”

Several Fed officials suggested the latest relief package “could hasten the recovery, which could help limit longer-term damage in labor markets caused by the pandemic.”

Anecdotal evidence suggests companies are recalling workers laid off during the pandemic and hiring new employees. An Institute for Supply Management survey on Monday showed services businesses reporting they “have recalled everyone put on waivers and made new hires” and had “additional employees added to service the needs of new customers at new locations.”

Still, the labor market recovery has a long way to go. Employment is 8.4 million jobs below its peak in February 2020.

The claims report also showed the number of people receiving benefits after an initial week of aid decreased 16,000 to 3.734 million in the week ended March 27. That was the lowest reading since March 2020 when mandatory closures of non-essential businesses were being enforced across many states to slow the first wave of COVID-19 infections.

The 12th straight weekly decline in the so-called continuing claims in likely due to people finding work and exhausting their eligibility for benefits, limited to 26 weeks in most states. About 5.634 million people were on extended benefits during the week ended March 20, up 117,108 from the prior week.

Another 786,962 were on a state program for those who have exhausted their initial six months of aid, down 230,780 from the week before. There were 18.2 million receiving benefits under all programs during the week ended March 20.

(Reporting by Lucia MutikaniEditing by Chizu Nomiyama and Paul Simao)

Food bank, charities busy in Algarve as pandemic ravages Portugal tourism

By Catarina Demony

FARO, Portugal (Reuters) – Carla Lacerda used to earn a good salary selling duty-free goods to holidaymakers arriving at Algarve airport in southern Portugal, but she lost her job last August due to the COVID-19 pandemic and quickly ran out of cash to feed her two kids.

The 40-year-old now receives around 500 euros ($587) per month in unemployment benefits, leaving her no option but to join the queue for food donations.

“I never thought I’d be in this situation,” Lacerda said as she waited for milk, vegetables and other essential goods at the Refood charity in Faro, capital of the Algarve. “It’s sad I’ve reached this point, but I’m not ashamed.”

Lacerda is one of thousands of people whose lives have been turned upside down by the pandemic, which has ravaged tourism across the sun-drenched Algarve region and left its popular beaches and golf resorts largely deserted.

Algarve’s food bank, which has two warehouses in the region, is now helping 29,000 people, almost double the number before the pandemic.

“It’s the first time since the food bank began in Algarve that the numbers have reached such a level,” said its president, Nuno Alves, as volunteers distributed food to drivers from various charities waiting in their cars outside.

Poverty is spreading across the middle class, said Alves, with people from the crucial tourism sector worst affected. Many businesses have had to shut and some may never reopen.

In February, the number of those registered as jobless in the Algarve jumped 74% from a year ago, more than in any other Portuguese region.

‘GOING HUNGRY’

At the Faro branch of Refood, which collects unwanted food from restaurants and supermarkets and distributes it to the needy, 172 families queue for supplies every week, an increase of some 160% since the pandemic started.

“We help an architect, a teacher, a nurse, a social worker,” said coordinator Paula Matias. “It’s very sad. I’m a mother and I cannot imagine what it’s like not to have a plate of food to give to your children.”

One man in his thirties who requested anonymity told Reuters he had lost his job as a personal fitness trainer to wealthy expats because of the COVID-19 pandemic, which also claimed the lives of his brother and nephew.

He sold everything he had, from his flashy car to a fish tank, to pay the bills, but in January he had to ask for help from community organization MAPS, which now gives him food, and also psychological support after he tried to take his own life.

“I tried to be strong but I couldn’t,” he said. “Government support never arrived and I couldn’t get out of the situation.”

MAPS vice-president Elsa Cardoso said pleas for help continued to rise and that some people who had worked in tourism jobs were now homeless.

“Every day there are more people no longer able to support themselves, who have been evicted,” Cardoso said, adding that it might take a while for things to improve.

Portugal has been under a second strict lockdown since January that is only now gradually being eased.

British retiree Denise Dahl said distributing food to the vulnerable through her own organization ‘East Algarve Families in Need’ had helped her through the grieving process after she lost her husband Terje to COVID-19 in December.

“If I didn’t have this I don’t know what would’ve happened,” said Dahl, who lives in the town of Tavira, adding that the situation in the Algarve continued to worsen.

“With the lack of tourists coming in this year we expect even more families going hungry.”

($1 = 0.8522 euros)

(Reporting by Catarina Demony; Additional reporting by Miguel Pereira and Pedro Nunes; Editing by Andrei Khalip and Gareth Jones)

Rise in U.S. weekly jobless claims belies improving labor market conditions

By Lucia Mutikani

WASHINGTON (Reuters) -The number of Americans filing new claims for unemployment benefits unexpectedly rose last week, though the labor market recovery is gaining traction as economic activity picks up, driven by increased vaccinations and massive fiscal stimulus.

That was confirmed by other data on Thursday showing a measure of manufacturing activity soared to its strongest level in more than 37 years in March, with employment at factories the highest since February 2018. Layoffs announced by U.S. companies in March were also the fewest in more than 2-1/2 years.

Initial claims have been distorted by backlogs, multiple filings and fraud, making it difficult to get a clear signal on the labor market’s health from the weekly data.

“Higher jobless claims in the most recent week don’t detract from the strong downward trend, which will continue given the reopening of local and state economies, and the acceleration of vaccinations,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia.

Initial claims for state unemployment benefits jumped 61,000 to a seasonally adjusted 719,000 for the week ended March 27, the Labor Department said.

Data for the prior week was revised to show 26,000 fewer applications received than previously reported, pushing total filings down to 658,000 and below their 665,000 peak during the 2007-09 Great Recession. In a healthy labor market, claims are normally in a 200,000 to 250,000 range.

The government revised the claims data from 2016, which showed applications hitting a record 6.149 million in April 2020, instead of 6.867 million in March 2020.

A staggering 79 million claims were filed under the regular state (UI) programs since mid-March 2020 when mandatory closures of non-essential businesses such as restaurants, bars and gyms were being enforced across many states to slow the first wave of COVID-19 infections.

About 28 more million applications were submitted under the government-funded Pandemic Unemployment Assistance (PAU) program, which covers the self-employed, gig workers and others who do not qualify for the UI programs.

“Together, that equates to 70% of payrolls, or 67% of household employment, pre-pandemic and reflects duplicate filings and fraud,” said Sarah House, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

“But also the tremendous churn in the labor market since COVID, with some workers losing jobs more than once as restrictions and activity fluctuated this past year.”

Economists polled by Reuters had forecast 680,000 applications in the latest week. Virginia accounted for the bulk of the rise. There were also notable increases in California, Georgia, Kentucky, New Jersey and New York.

Including the PUA program, 951,458 people filed claims last week, remaining below one million for a second straight week.

U.S. stocks were higher. The dollar slipped against a basket of currencies. U.S. Treasury prices rose.

MANUFACTURING SHINES

Both the economy and the labor market appear to have turned the corner after hitting a ditch in December, thanks to the acceleration in inoculations, which is allowing more businesses to reopen. The White House’s massive $1.9 trillion pandemic relief package is sending additional $1,400 checks to qualified households and extending the government safety net for the unemployed through Sept. 6.

In a separate report on Thursday, the Institute for Supply Management (ISM) said its index of national factory activity jumped to a reading of 64.7 last month from 60.8 in February. That was the highest level since December 1983.

A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists had forecast the index rising to 61.3 in March. The survey’s manufacturing employment gauge shot up to its the highest reading since February 2018.

According to the ISM, “significantly more companies are hiring or attempting to hire than those reducing labor forces.”

Indeed, a third report from global outplacement firm Challenger, Gray & Christmas showed planned layoffs by U.S.-based companies dropped 11% to 30,603 in March, the fewest since July 2018. Through the first quarter planned layoffs plunged 35%, compared the October-December period. At 144,686, job cuts last quarter were the fewest since the fourth quarter of 2019.

The labor market’s improving fortunes were underscored by a survey from The Conference Board this week showing its measure of household employment rebounding in March after three straight monthly decreases. That aligns with expectations that the government’s closely watched employment report on Friday will show a surge in job growth in March.

According to a Reuters survey of economists, nonfarm payrolls likely increased by 647,000 jobs last month after rising by 379,000 in February. That would leave employment about 8.8 million below its peak in February 2020, highlighting that a full labor market recovery is years away.

At least 18.2 million people were collecting unemployment checks in mid-March, a sign that long-term joblessness was becoming entrenched.

“But even at that rapid (hiring) clip, it would take the economy until January 2024 to get back to pre-pandemic trends,” said Andrew Stettner, senior fellow at The Century Foundation.

“This cold, hard math underscores the hurdles facing the millions of workers still on state or federal jobless aid as they seek to return to productive work.”

(Reporting By Lucia MutikaniEditing by Chizu Nomiyama)

U.S. private payrolls post biggest gain in six months; housing market cooling

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. private employers hired the most workers in six months in March as more Americans got vaccinated against COVID-19, pushing the economy towards a broader reopening, which is expected to unleash a strong wave of pent-up demand in the coming months.

Though the private payrolls gain shown in the ADP National Employment Report on Wednesday was slightly below economists’ expectations, the jump in hiring aligned with a recent improvement in labor market conditions. The broad-based increase was led by the leisure and hospitality industry.

The labor market and economy are also being supported by the White House’s massive $1.9 trillion pandemic relief package.

“Companies were hiring again in March and the economy was roaring,” said Chris Low, chief economist at FHN Financial in New York.

Private payrolls surged by 517,000 jobs this month after rising 176,000 in February. Economists polled by Reuters had forecast private payrolls increasing by 550,000 jobs in March.

The leisure and hospitality sector added 169,000 jobs after only 51,000 in February. Construction payrolls rebounded by 32,000 jobs, while hiring at factories rose by 49,000 positions.

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

It has a very poor track record of predicting the private payrolls count in the government’s more comprehensive, and closely watched employment report because of methodology differences. Recent reports have pointed to rapidly improving labor market conditions.

The number of Americans filing new claims for unemployment benefits has dropped to the lowest level since the start of the COVID-19 pandemic in March 2020. A report on Tuesday showed a measure of household employment rebounding by the most in a year in March after three straight monthly decreases.

Stocks on Wall Street were higher. The dollar slipped against a basket of currencies. U.S. Treasury prices fell.

STRONG JOB GAINS EXPECTED

According to a Reuters survey of economists, nonfarm payrolls likely surged by 647,000 jobs in March after rising by 379,000 in February. The government is due to publish March’s employment report on Friday.

“We still expect nonfarm payrolls to show an above-consensus 700,000 gain, with a lot of that gain reflecting the rebound in leisure and hospitality employment,” said Michael Pearce, a senior U.S. economist at Capital Economics in New York.

Economists are hopeful that the labor market has turned the corner after shedding 306,000 jobs in December. The relief package passed this month is sending additional $1,400 checks to qualified households and extending the government safety net for the unemployed through Sept. 6.

That is expected to drive consumer spending beginning in March. In addition, Americans have amassed about $1.9 trillion in excess savings, which economists expect will fuel consumer spending when the economy fully re-opens this year and well into 2021, and spur demand for workers.

Atlanta Federal Reserve bank president Raphael Bostic said on Tuesday, “a million jobs a month could become the standard through the summer.”

Employment is 9.5 million jobs below its peak in February 2020. While the labor market is regaining its footing, the housing market appears to be stumbling as surging prices amid tight supply and rising mortgage rates reduce affordability.

A separate report on Wednesday from the National Association of Realtors showed its Pending Home Sales Index, based on contracts signed in February, tumbled 10.6%, with contracts falling in all four regions.

Economists had forecast pending home contracts, which become sales after a month or two, would decline 2.6% in February. Compared to a year ago, pending home sales slipped 0.5% in February. Contracts had increased for eight straight months on a year-on-year basis.

The supply of existing homes is at a record low. The 30-year fixed-rate mortgage has risen to a nine-month high of 3.17%, according to data from mortgage finance agency Freddie Mac. Mortgage rates have increased since February.

The decline in contracts suggested sales of previously owned homes could fall further in March after dropping sharply in February. A third report from the Mortgage Bankers Association showed applications for loans to buy a home fell last week after four straight weekly increases.

“The housing market continues to face both tailwinds and headwinds. Pent-up demand and a strong economic rebound should support sales as we head into the heart of the spring home selling season,” said Nancy Vanden Houten, lead economist at Oxford Economics in New York.

“However, tight inventories and home prices at multi-year highs will make homebuying difficult for some households.”

Data on Tuesday showed the S&P CoreLogic Case-Shiller house price index soared 11.2% in January from a year ago, the fastest in 15 years, after rising 10.4% in December.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)

U.S. wholesale stocks rise solidly; inventories-to-sales ratio lowest in six years

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. wholesale inventories increased solidly in January even as sales surged and it is taking wholesalers the shortest time in six years to clear shelves, a sign of strengthening demand that aligns with expectations for faster economic growth this year.

The Commerce Department said on Monday that wholesale inventories rose 1.3% as estimated last month. Stocks at wholesalers gained 0.6% in December. The component of wholesale inventories that goes into the calculation of gross domestic product also increased 1.3% in January.

Inventories rose 0.6% in January from a year earlier. Sales at wholesalers jumped 4.9% after advancing 1.9% in December. At January’s sales pace it would take wholesalers 1.24 months to clear shelves. That was the shortest since November 2014 and was down from 1.29 months in December.

Domestic demand is picking up after hitting a pothole late in the fourth quarter, driven by declining COVID-19 infections and nearly $900 billion in additional pandemic relief from the government. Consumer spending rebounded sharply in January after slumping in November and December.

Spending is likely to accelerate further if Congress, as expected, approves President Joe Biden’s $1.9 trillion coronavirus relief plan. The bill, which was passed by the Senate on Saturday, will send one-time $1,400 checks to many low- and middle-income Americans as well as extend government-funded unemployment benefits for millions of people.

Economists estimate the economy could grow this year by as much as 7%, fueled by the massive fiscal stimulus and rollout of vaccines that are expected to get the pandemic under control. That would be the fastest growth since 1984 and would follow a 3.5% contraction last year, the worst performance in 74 years.

Businesses are replenishing inventories after they were drawn down early in the pandemic, helping to underpin manufacturing. But a big chunk of the inventory build is coming from imports, which could keep the trade deficit elevated.

The government reported last week that imports of goods raced to a record high in January. Wholesale stocks of motor vehicles and parts rebounded 1.2% in January. There were also increases in stocks of professional and computer equipment, as well as petroleum. Machinery inventory, however, fell.

Wholesale goods sales were boosted by the automotive, professional equipment, computer equipment, machinery and petroleum categories.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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. Senate Democrats drop minimum wage plan for $1.9 trillion COVID-19 relief bill

By Susan Cornwell

WASHINGTON (Reuters) – U.S. Democrats, anxious for Congress to pass President Joe Biden’s $1.9 trillion coronavirus relief bill within the next two weeks, have resolved a potential sticking point for getting the sweeping legislation through the narrowly divided Senate.

The House of Representatives narrowly approved the bill to fight the pandemic and boost the economy early Saturday. The action now moves to the Senate, where Democrats do not expect much if any Republican help, even though polls indicate a majority of Americans – around 70% – favor the measure.

Over the weekend, top Democrats abandoned a controversial plan to use U.S. tax policy as an incentive for businesses to more than double the minimum wage to $15 per hour, according to a source familiar with the negotiations. The proposal would have complicated Senate passage.

Democratic Vice President Kamala Harris may have to cast a tie-breaking vote in a chamber where Republicans control 50 seats and Democrats and their allies control the other 50. Even this outcome depends on all the Democrats staying united behind the first major bill to come through Congress in the Biden administration.

“We’re moving ahead with a bill that probably will get no Republican votes in the Senate, but will have broad Republican support in the country,” Senator Chris Coons, a Democrat, said on CNN’s “State of the Union” Sunday.

Republicans in Congress say the plan is too expensive and includes things like transportation projects that have nothing to do with relief for COVID-19.

“It’s $1.9 trillion, more than half of it won’t even be spent in this calendar year … So how could it be about COVID relief? No one expects a year from now that we’ll be in the COVID crisis we are in now,” Republican Senator Rob Portman told ABC’s “This Week.”

STICKING POINT RESOLVED

The House-passed COVID-19 aid bill would raise the national hourly minimum wage for the first time since 2009, to $15 from $7.25. But the Senate’s rules expert said the wage hike could not be included as long as Democrats are using a maneuver that allows the coronavirus bill to pass with a simple majority, rather than the 60 votes needed to advance most legislation in the 100-seat chamber.

Democrats dropped the plan to get around this setback by using the tax code to push for a higher wage after running into a number of political and practical hurdles.

That decision resolved a potential sticking point for the legislation. While progressives want the wage increase kept in the COVID-19 bill, some moderate Democrats like Senator Joe Manchin favor a smaller increase in the minimum wage, to about $11 an hour.

Both chambers must pass the same version of the bill before sending it to Biden for signing into law. Democrats want this to happen by March 14, when enhanced unemployment benefits expire.

The measure would pay for vaccines and send a new round of aid to households, small businesses and state and local governments. The big-ticket items include $1,400 direct payments to individuals, a $400-per-week federal unemployment benefit through Aug. 29, and help for those in difficulty paying rents and home mortgages during the pandemic.

Democrats say the package is needed to fight a pandemic that has killed more than 500,000 Americans and thrown millions out of work.

(Reporting by Susan Cornwell; Additional reporting by David Morgan; Editing by Mary Milliken, Nick Zieminski and Chizu Nomiyama)

U.S. House budget committee approves $1.9 trillion COVID-19 aid bill

WASHINGTON (Reuters) – The U.S. House of Representatives Budget Committee on Monday approved legislation with $1.9 trillion in new coronavirus relief, advancing a top priority of President Joe Biden.

The measure passed the panel on a largely party-line vote of 19-16. The full House, which has a slim Democratic majority, hopes to pass the bill later this week. It would stimulate the U.S. economy and carry out Biden’s proposals to provide additional money for COVID-19 vaccines and other medical equipment.

Last week, Democratic Senate Majority Leader Chuck Schumer predicted his deeply divided chamber would approve the bill before March 14, when the latest round of federal unemployment benefits expires.

Biden and his fellow Democrats want to pass the plan quickly to speed a new round of direct payments to U.S. households as well as extend federal unemployment benefits and assist state and local governments. The U.S. economy has struggled over the past year under job layoffs and shuttered businesses resulting from a pandemic that has killed 500,000 Americans.

But the Democrats are using a procedural strategy called reconciliation to advance the bill, which will allow them to pass it in the Senate without Republican support.

“We are in a race against time. Aggressive, bold action is needed before our nation is more deeply and permanently scarred by the human and economic costs of inaction,” Representative John Yarmuth, chairman of the Budget Committee, said before the vote.

Republicans pushed back on the president’s price tag, which follows $4 trillion in COVID-19 aid last year.

“An estimated $1 trillion of those funds is actually yet to be spent,” Representative Buddy Carter told the committee. “Why do we need to spend an additional $2 trillion of money that is being taken from current generations?”

(Reporting by Susan Cornwell; Editing by Chizu Nomiyama and Peter Cooney)

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)

Trump signs pandemic aid and spending bill, averting government shutdown

By Steve Holland and Susan Cornwell

PALM BEACH, Fla./WASHINGTON (Reuters) -U.S. President Donald Trump on Sunday signed into law a $2.3 trillion pandemic aid and spending package, restoring unemployment benefits to millions of Americans and averting a federal government shutdown.

The President had demanded that Congress change the bill to increase the size of stimulus checks for struggling Americans to $2,000 from $600 and also cut some other spending.

After signing the bill, Trump said he was signing the bill with “a strong message that makes clear to Congress that wasteful items need to be removed.”

“Much more money is coming,” he insisted in a statement.

Many economists agree the financial aid in the bill should be higher to get the economy moving again but say that immediate support for Americans hit by coronavirus lockdowns is still urgently needed.

Unemployment benefits being paid out to about 14 million people through pandemic programs lapsed on Saturday, but will be restarted now that Trump has signed the bill.

The package includes $1.4 trillion in spending to fund government agencies. If Trump had not signed the legislation, then a partial government shutdown would have begun on Tuesday that would have put millions of government workers’ incomes at risk.

Americans are living through a bitter holiday season amid a pandemic that has killed nearly 330,000 people in the United States, with a daily death toll now repeatedly well over 3,000 people, the highest since the pandemic began.

The relief package also extends a moratorium on evictions that was due to expire on Dec. 31, refreshes support for small business payrolls, provides funding to help schools re-open and aid for the transport industry and vaccine distribution.

Trump noted that the House of Representatives planned to vote on Monday to increase coronavirus relief checks to individuals from $600 to $2,000, and said the Senate “will start the process” to approve higher payments.

(Reporting by Steve Holland and Susan Cornwell; additional reporting by Aram Roston and Matt Spetalnick; Writing by Matt Spetalnick and Alistair Bell. Editing by Daniel Wallis and Diane Craft)