© Reuters. People wait in line to enter the Nassau County Mega Job Fair at Nassau Veterans Memorial Coliseum in Uniondale, New York
By Lucia Mutikani
WASHINGTON (Reuters) – The number of Americans filing first-time applications for unemployment benefits unexpectedly rose last week, raising the risk of a second straight month of tepid job growth despite declining new COVID-19 infections.
The weekly unemployment claims report from the Labor Department on Thursday, the most timely data on the economy’s health, could add impetus to President Joe Biden’s push for a $1.9 trillion package to aid the recovery from the pandemic.
At least 18.3 million Americans were receiving unemployment checks at the end of January. Government-funded benefits for millions of these people will expire in mid-March unless Congress approves the Biden administration’s spending plan.
“Robust pandemic aid is precisely the medicine the economy needs to get Americans back where they want to be, at work,” said Andrew Stettner, senior fellow at The Century Foundation.
Initial claims for state unemployment benefits increased 13,000 to a seasonally adjusted 861,000 for the week ended Feb. 13. Data for the prior week was revised to show 55,000 more applications received than previously reported.
Economists polled by Reuters had forecast 765,000 applications in the latest week. Many were perplexed by the second straight weekly increase in claims, given the declining coronavirus cases, the disbursement of nearly $900 billion in additional rescue aid by the government in late December and the White House’s pending massive stimulus package.
Timely data have shown an improvement in economic activity, with retail sales surging by the most in seven months in January. Job openings have also been creeping higher.
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.”
“There have been promising signs of improvement which will hopefully be further boosted by the upcoming spring weather,” said AnnElizabeth Konkel, an economist at Indeed Hiring Lab in Washington.
Stocks on Wall Street were trading lower. The dollar slipped against a basket of currencies. U.S. Treasury prices fell.
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 (NYSE:) announced it would take down production entirely at its Fairfax plant in Kansas City during the week of Feb. 8.
Ford Motor (NYSE:) has reduced shifts at its Dearborn truck plant and Kansas City assembly plant.
There were big jumps in filings in California and Illinois. Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state programs, 1.4 million people filed claims last week.
Claims 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.
Last week’s claims data covered the period during which the government surveyed businesses for the nonfarm portion of February’s employment report. Though claims have not provided a good signal on job growth because of the economic shock caused by the pandemic, the continued increase in filings is consistent with weak labor market conditions.
“Through the recent choppiness, the data from the past few months generally have been higher than the figures reported for much of October and November, suggesting some weakening in the labor market since then,” said Daniel Silver, an economist at JPMorgan (NYSE:) in New York.
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.
Away from the labor market, the economy is steadily improving. A second report from the Commerce Department on Thursday showed permits for future home construction soared in January to their highest level since 2006.
The housing market has outperformed other sectors of the economy during the COVID-19 pandemic, supported by lower mortgages rates and demand for spacious accommodations for home offices and schooling. But expensive inputs and lack of land pose a threat to continued robust housing market gains.
Other data from the Labor Department showed import prices increased by the most in nearly nine years in January, lifted by higher prices for energy products and a weak dollar, supporting expectations for an acceleration in inflation in the coming months.