New US jobless claims bump higher to 745,000

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New claims for unemployment benefits rose to 745,000 last week as the pandemic continued to weigh on the US labour market even while some coronavirus restrictions were eased.

The number of jobless claims filed for regular state programmes increased by 9,000 in the week ending February 27, from 736,000 the previous week, the US labour department said on Thursday. Economists had expected claims to rise to 750,000.

The small increase came after last week’s jobless claims fell to their lowest level in three months, when severe winter weather hit Texas, the second-most populous American state, and much of the central US, and may have affected new filings.

Thursday’s report showed Texas and Ohio were among the states reporting the biggest increases in applications for jobless claims at 17,769 and 17,442, respectively.

Still, the smaller than expected rise after the storm “suggests that the underlying trend in lay-offs is falling, thanks to the reopening now under way across many states”, said Ian Shepherdson, economist at Pantheon Macroeconomics.

Claims for federal pandemic unemployment assistance — which includes gig workers and the self-employed who would not be eligible for regular state benefits — rose by 9,246 to 436,696 on an unadjusted basis.

A separate report showed American workers’ productivity fell an annualised 4.2 per cent in the final quarter of last year — less than initially estimated, but still the largest decline since the 1980s — as hours worked outpaced production. However, productivity is expected to improve this year as the US economy reopens.

US stocks rose at the start of trading, with the S&P 500 up 0.4 per cent. The yield on the US 10-year Treasury edged slightly higher to 1.486 per cent.

The uneven nature of the labour market recovery has provided an impetus for President Joe Biden’s $1.9tn fiscal stimulus package. Biden and Democratic leaders have reached a compromise that would limit eligibility for $1,400 stimulus cheques ahead of a Senate vote on the legislation.

Economists hope that the US economic rebound will speed up as vaccines are distributed more widely. The Biden administration has accelerated its vaccine timeline and now expects there to be enough doses to inoculate every adult in the country by the end of May — two months earlier than previously announced — as it hopes to turn the corner in the fight against the pandemic, which has killed more than 508,000 Americans. 

The vaccine rollout and the recent decline in coronavirus cases and hospitalisations continue to support the gradual reopening of the US economy. Texas and Mississippi this week threw open the doors for businesses, ending all capacity curbs for companies to bolster their economies.

That has alarmed some public health officials, however, who are concerned that the decline in new infections is starting to stall. Biden slammed the reopenings as a “big mistake”. 

The new claims figures come ahead of Friday’s non-farm payrolls report, which is expected to show the US economy added 182,000 jobs and the unemployment rate held steady at 6.3 per cent in February. 

The number of weekly claims still remains well above the pre-pandemic peak of 695,000 struck in 1982. More than 18m Americans continue to seek jobless benefits almost a year after the pandemic led to widespread lockdowns and a steep economic contraction.

“The claims data remind us that the labour market remains weak and a full healing will be a multiyear process,” said Nancy Vanden Houten, economist at Oxford Economics.

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