Some economists say expiration of $600 benefit contributed to drop in claims
By Christopher Rugaber
AP Economics Writer
WASHINGTON (AP) — The number of laid-off workers applying for unemployment aid fell below 1 million last week for the first time since the viral pandemic intensified five months ago, yet still remains at a high level.
The latest figures show that the pandemic keeps forcing layoffs just as the expiration of a $600-a-week federal jobless benefit has deepened the hardships for many — and posed a renewed threat to the U.S. economy.
The level of weekly applications declined to 963,000, the second straight drop, from 1.2 million the previous week, the government said Thursday. The decline signaled that layoffs are slowing, though the latest figure still far exceeds the pre-pandemic weekly record of just under 700,000.
The pandemic, the shutdowns that are meant to fight it and the reluctance or inability of many people to shop, travel or eat out are continuing to weaken the economy and force companies to cut staff.
Twenty-three states have paused or reversed their business re-openings. In a hopeful sign, the rate of new confirmed viral cases has declined in the past couple of weeks, though it remains far above the rates that prevailed during May and June.
Fewer people are continuing to receive state jobless aid, a sign that some employers are hiring despite the still-heavy pace of layoffs. That figure declined last week to 15.5 million, from 16.1 million the previous week.
“Another larger-than-expected decline in jobless claims suggests that the jobs recovery is regaining some momentum, but...much labor market progress remains to be done,” said Lydia Boussour, senior economist at Oxford Economics.
Hiring is believed to have slowed since the spring, when states first reopened and millions of workers at bars, restaurants and retail stores were rehired. The job gain in August will probably fall short of the 1.8 million added in July, analysts say, which was below May’s and June’s gains.
Nick Bunker, a research director at the job search website Indeed, said job postings on the site grew in early August at their slowest pace in 14 weeks. And Kronos, which makes work scheduling software, says the number of shifts worked rose just 0.5% last week, compared with average weekly growth of 2.7% in May and 1.9% in June.
For months, on top of their state benefit, unemployed Americans had also received the $600 a week in federal jobless aid. But that payment has expired, and negotiations in Congress to extend the benefit, likely at a lower dollar level, have collapsed in rancor.
Some economists say they think the expiration of the $600 benefit has contributed to the drop in unemployment claims over the past two weeks. With jobless aid now sharply lower, some of the unemployed may feel less incentive to apply at all.
The supplemental federal aid had enabled many jobless Americans to afford rent, food and utilities, and its expiration threatens to weaken consumer spending and further slow the economy.
Unemployment benefits have accounted for roughly 5% of national income since April, a larger share than even Social Security. The loss of the $600 has shrunk benefits for the average recipient by one-half to three-quarters.
Michelle Meyer, an economist at Bank of America Merrill Lynch, says that the loss of the additional aid will reduce Americans’ incomes by $18 billion a week.
“That’s a big hit to purchasing power,” she said.
Last week, President Donald Trump issued an executive order that would provide $300 a week in federal aid to the jobless to replace the expired $600-a-week benefit. But experts say it would take weeks for the states to implement that payment.
In addition to people who applied last week for state benefits, nearly 489,000 others sought jobless aid under a new program that has made self-employed and gig workers eligible for the first time. That figure isn’t adjusted for seasonal trends, so it’s reported separately. Including the gig and self-employed recipients, the Labor Department says 28.2 million people — roughly 18% of the U.S. workforce — are now receiving some form of unemployment benefits.
For states to set up systems to distribute a new $300 federal jobless benefit, their labor departments would need more guidance from the federal government, noted Michele Evermore, a senior researcher at the National Employment Law Project. The money, which is supposed to come from a federal disaster relief fund, would likely require states to hire more people and possibly contract with software vendors to establish a system to process the payments.
“I can’t imagine that this goes up in less than a month anywhere,” she said.
The disaster relief fund contains just $44 billion, which is only enough to provide benefits for five to six weeks, analysts say. So far, only Ohio, South Carolina, and West Virginia have said they will implement the program. Most other states have said they need further guidance from the Labor Department to determine their next steps, Evermore said.
When Congress set up the aid program for gig and self-employed workers, and provided the extra $600, both programs required the states to create new processing systems while handling a crush of benefit applications. That influx resulted in huge backlogs and left millions of the unemployed frustrated by their inability to access benefits. Washington state, for one, eventually called in National Guard troops to help process applications.
In the meantime, with confirmed virus cases still high, it’s not clear when business owners will be able to reopen or will have enough customers to rehire.
Grace Della is one of them. She opened her food tour business in Miami a decade ago with $300 from her mother. On weekends, she led the tours herself and eventually built up a business with 13 tour guides, averaging 10 tours a day through culinary hot spots in South Beach and Little Havana.
Yet with the risk of infection still high and with scant customer demand, it’s been more than four months since Miami Culinary Tours has taken out guests, and Della, 46, says she doesn’t expect to recall her employees anytime soon.
She hopes to reopen later this month but isn’t sure she can, given the state’s high level of confirmed infections. Della said she tries to stay positive but confesses to moments of crippling fear. At one point, hyperventilating with anxiety, she contacted firefighters.
“There’s no money coming in,” Della said. “We’re all scared.”
