Layoffs in the United States are abating, but millions who lost their jobs because of Covid-19 continue to draw unemployment benefits, suggesting the labour market could take years to heal from the pandemic even as businesses resume hiring workers.
New applications for state unemployment benefits fell to a seasonally adjusted 1.542 million for the week ended June 6th, from 1.897 million the prior week, the US labour department said on Thursday. That pulled initial claims further away from a record 6.867 million in late March.
But the number of people staying on benefits remained high, with the so-called continued claims number at 20.929 million for the week ended May 30th, the most recent data available for that metric. This was still lower than 21.268 million in the prior week.
The weekly jobless claims report, the most timely data on the economy’s health, followed news last Friday of a surprise 2.5 million increase in non-farm payrolls in May. It reinforced views the labour market has weathered the worst of the turbulence. But claims for jobless benefits are still more than double their peak during the 2007-2009 great recession.
Elevated claims
Many businesses have reopened after being shuttered in mid-March to slow the spread of Covid-19. However, claims remain elevated amid jobs cuts outside the consumer sector, among industries not initially hit by the shutdown.
"The steady retreat in claims is a positive development, but the labour market has suffered a traumatic blow and a full recovery will be measured in years, not weeks or months," said Nancy Vanden Houten, lead US economist at Oxford Economics in New York. "The figures don't capture the full extent of the blow dealt to workers during this unique crisis."
The US Federal Reserve signalled on Wednesday it would provide years of extraordinary support for the economy, with policymakers projecting a 9.3 per cent unemployment rate at year end. The unemployment rate has jumped from 3.5 per cent in February and was at 13.3 per cent in May. Fed chairman Jerome Powell told reporters on Wednesday there would be an "extended period" during which it would be "difficult for many people to find work". – Reuters
