A broad measure of layoffs likely continued to hover just below 1.5 million last week, economists say, highlighting a labor market recovery that has lost steam as many states pause or reverse reopenings amid COVID-19 spikes.
Economists surveyed by Bloomberg estimate that Americans filed 1.42 million initial applications for unemployment benefits – a rough measure of layoffs – during the week ending Aug. 1. That would mark a modest drop from 1.43 million first-time claims the week before but suggests the number remains elevated and may well have risen again.
Such a tally would push total initial claims past a mind-blowing 55 million since pandemic-induced business shutdowns and layoffs began in mid-March. The latest count, which the Labor Department is set to release Thursday, will figure into the August employment report.
Economists on average expect the July report, out Friday, to show more than 1 million job gains – including hiring and layoffs – but there’s wide disparity in the forecasts, with some experts predicting job losses and others reckoning that payrolls held steady.
Meanwhile, first-time jobless claims have increased for two straight weeks after a 15-week stretch of declines as coronavirus surges in the South and West led more than 20 states to suspend or roll back the reopening of restaurants, bars, gyms, movie theaters and other outlets.
Continuing claims are estimated to have fallen to 16.9 million from 17 million the previous week. Economists have been focusing more intently on continuing claims, which represent all American still receiving benefits with a one-week lag. It thus reflects all those still unemployed and accounts for people who have returned to work as businesses have reopened.
That figure also has trended down, though it rose in the most recently reported week for the first time in nearly two months.
“The increase in continued claims suggests that rehiring may be pausing as the rise in COVID-19 cases causes more businesses to shut down or scale back reopening plans,” economist Nancy Vanden Houten of Oxford Economics wrote in a note to clients.
Hot-spot states such as Texas, Arizona and Florida have reversed reopening plans, but even New York City has delayed the reopening of indoor dining.
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“The recent improvement in the rate of hiring maybe stalling out,” Barclays said in a research note.
The setback comes as jobless workers grapple with the expiration of a $600 federal supplement to state unemployment benefits at the end of last month and Congress remains at an impasse over whether to extend the bonus and at what level.
Other measures of economic activity also point to a slowdown. The number of open small businesses at the end of July was roughly unchanged compared with the beginning of the month, according to Homebase, which makes scheduling software. In turn, fewer employees were working slightly fewer hours.
Also, a Census Bureau “household pulse” survey indicates there were nearly 7 million fewer jobs between the June and July employment report surveys, Capital Economics wrote in a research notes. It adds, however, that the pulse data isn’t seasonally adjusted and may not account for large drops in employment at schools at the start of the summer.
Overall, initial and continuing claims declined between the June and July employment survey weeks, prompting economists polled by Bloomberg to forecast that Friday’s report will show 1.5 million job gains in July. That, however, would mark a slowdown from the 2.7 million payroll increases in May and 4.8 million in June, a surge that recouped about a third of the 22 million jobs the economy shed the prior two months.
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Diane Swonk, chief economist of Grant Thornton, expects just 750,000 job gains in July, while Barclays predicts payrolls will be unchanged. Ian Shepherdson, chief economist of Pantheon Macroeconomics, says there’s a risk employment could fall in August.