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Unemployment claims surge and show new financial distress

Ten months after the coronavirus crisis devastated the labor market, the resurrected pandemic continues to shock the US economy.

Although more than half of the 22 million jobs lost last spring have recovered, the surge in new infections has slowed recovery, causing shutdowns and layoffs that have hit the leisure and hospitality industry in particular.

The latest evidence came Thursday, when the Ministry of Labor reported last week that the first claims for state unemployment allowances surged to over one million for the first time since July.

Just a few days ago, the government announced that employers had cut 140,000 jobs in December. This is the net decline in employment since last spring, with restaurants, bars and hotels recording sharp losses.

“We’re in a serious financial hole and we’re digging in the wrong direction,” said Daniel Zhao, senior economist at career site Glassdoor. “The report clearly shows that the increase in complaints is worse than expected, and there is reason to think that things will get worse before things get better.”

The outlook is even more awkward, as the $ 300 weekly federal supplement to other unemployment benefits, a key element of the relief package signed by President Trump last month, is set to disappear in mid-March.

President-elect Joseph R. Biden, Jr., said he would promote new stimulus measures through parliament to provide lifelines for workers and employers until the pandemic is curtailed. His plans include direct payments to most households and assistance to SMEs and local governments and state governments.

Recent economic data has brought a new sense of urgency to such efforts, and millions of people are struggling to reach their goals, despite the potential for more unemployment. I will.

The Ministry of Labor said Thursday that 1.15 million workers had filed their first claim for state unemployment allowance during the first full week of the new year. An additional 284,000 claims have been filed for emergency federal programs for pandemic unemployment support, freelancers, part-time workers, and others who are not normally covered by state unemployment benefits. Neither number is seasonally adjusted. On a seasonally adjusted basis, the new state billed a total of 965,000.

Prior to the pandemic, weekly filings were typically around 200,000.

Holidays may have curtailed unemployment insurance claims the previous week, and people were waiting to file claims until the New Year. However, some economists were skeptical that delays in filing were a major factor in the increase in complaints last week.

“I don’t think there’s any doubt that some anomalies may be happening in the margins,” said Mark Hamrick, senior economic analyst at Bankrate.com. “But we also have to think about the fact that these are not grandfather’s unemployment lines. That is, much of this is done digitally. If you want to understand human nature, when you’re off work I don’t think it makes much sense for someone to delay a request for financial assistance. “

More likely, a $ 300 federal supplement has prompted an increase in demand for benefits.

The turmoil over the new federal aid, which Mr. Trump spent several days threatening not to sign, could also have temporarily delayed claims for pandemic unemployment aid, which declined in the week leading up to January 2. Last week’s increase is consistent with previous increases.

Despite the new federal aid for the unemployed in last month’s law, concerns continue about processing payments (state-assigned tasks) after problems occurred in the first round of emergency benefits last spring. ..

“The state is now particularly cautious about getting as much guidance as possible,” said Michele Evermore, senior policy analyst at the National Employment Law Project, a nonprofit workers’ rights group. But she said some states, including New York, have taken a “question later” approach, this time seemingly better prepared to act swiftly.

She said she expects the “significant part” of the program to be up and running in most states by next week, if not all components.

In addition to a $ 300 weekly supplement and a short-term renewal of gigworker and self-employed benefits, the latest federal aid has renewed the Pandemic Emergency Unemployment Compensation, a program for people who have run out of state benefits.

The nature of the state’s unemployment program is different, some of which are targeted by the Democratic Party because they provide benefits for only 12 weeks during normal hours. Biden promised to allow Americans to get “completely on time” unemployment insurance, and Senator Ron Wyden, a Democrat in Oregon and the next chairman of the Senate Finance Committee, said the country. Unemployment allowance system.

Among the clauses endorsed by some Democrats is the automatic renewal of federal unemployment and other aid until the unemployment rate drops to a certain level. It will reduce the need for repeated parliamentary actions during times of crisis.

Meanwhile, as the coronavirus attacks the service sector, employers may cut more jobs in the coming weeks. Some companies that are struggling cannot survive.

“Looking at the pandemic situation and health, people should be afraid of the virus, which will have financial implications,” said career site economist An Elizabeth Conkel. .. “The virus is the source of everything that is happening now.”

Still, economists and analysts are looking to a better time, perhaps as soon as spring comes. As more people are vaccinated, cases begin to decline, which can ease business restrictions and lead to a resurgence of consumer activity. As with last year, the warm weather can attract more people and slow the spread of the virus. New stimuli may also alleviate some of the financial distress of the pandemic.

But even if the coronavirus is contained, economists say it won’t rise overnight.

“In the second quarter, the economy should start to recover,” said Hamrick of Bankrate. “But obviously, this will take much longer than everyone expected, and probably will take longer to heal.”

Unemployment claims surge and show new financial distress

Source link Unemployment claims surge and show new financial distress

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