U.S. weekly jobless claims remain high, second wave of layoffs blamed

A second wave of layoffs amid weak demand and fractured supply chains is likely keeping new U.S. applications for unemployment benefits elevated, supporting views that the economy faces a long and difficult recovery from the COVID-19 recession.

The Labor Department’s weekly jobless claims report on Thursday, the most timely data on the economy’s health, is expected to sketch a picture of continued labor market distress even though employers hired a record 2.5 million workers in May as businesses reopened after shuttering in mid-March to slow the spread of COVID-19.

Millions are still collecting unemployment checks. Federal Reserve Chair Jerome Powell told lawmakers this week that “significant uncertainty remains about the timing and strength of the recovery.” The economy fell into recession in February.

Initial claims for state unemployment benefits likely totaled a seasonally adjusted 1.3 million for the week ended June 13, down from 1.542 million in the prior week, according to a Reuters survey of economists.

The 11th straight weekly drop would push claims further away from a record 6.867 million in late March. Still, claims would be roughly double their peak during the 2007-09 Great Recession.

From manufacturing, retail, information technology and oil and gas production, companies have announced job cuts. State and local governments, whose budgets have been shattered by the COVID-19 fight, are also cutting jobs.

Economists expect an acceleration in layoffs when the government’s Paycheck Protection Program, part of a historic fiscal package worth nearly $3 trillion, giving businesses loans that can be partially forgiven if used for wages, runs out.

Initial claims will cover the week during which the government surveyed establishments for the nonfarm payrolls component of June’s employment report. But economists cautioned that claims were no longer a good predictor of job growth.

The government has expanded eligibility for unemployment benefits to include the self-employed and independent contractors who have been affected by the COVID-19 pandemic, including through lost employment, reduced hours and wages. These workers do not qualify for the regular state unemployment insurance.

U.S. weekly jobless claims remain high, second wave of layoffs blamed, Reuters, Jun 18