New weekly jobless claims drop, but US unemployment rate remains grim

The number of Americans filing new claims for jobless benefits dropped more than expected in the last week of August, but unemployment rates remain extremely high, with millions still in need of government assistance.

In the week ending 29 August, 881,000 people applied for state unemployment aid. The figure is the lowest weekly total since the pandemic began in March and is down from the prior week’s total of 1.011 million new claims, according to figures from the Labour Department.

Economists polled by Reuters had forecast 950,000 applications in that week, but the surprising figure still masks a grim reality — new claims had never topped 700,000 before the onset of the pandemic — not even during the Great Recession of 2007-2009.

Government figures show 13.3 million people continue to receive traditional jobless benefits, up from 1.7 million a year ago.

One reason for the weekly drop is a new change in methodology to account for seasonal fluctuations in labour market data. Economists had complained that the previous methodology had become less reliable because of the economic shock caused by the coronavirus crisis.

In addition to the people who applied for unemployment benefits last week, a further 759,000 others sought help under a new programme that has made self-employed and gig workers eligible for the first time, the Associated Press reports. That figure is not adjusted for seasonal trends, so is reported separately.

Including that group, Labour Department figures show 29.2 million people are receiving some form of unemployment benefits, though that figure might be inflated by double-counting by some states. This includes regular state benefits, pandemic unemployment assistance and emergency compensation, extended benefits and other programmes.

On Friday the government will issue its jobs report for August and is expected to announce that a further 1.4 million jobs were added last month.

While 9.3 million jobs have been recovered since the initial crush of lay-offs in March and April, that figure is only 42 per cent of the total number of job losses attributable to the pandemic. A further 13 million jobs were lost.

Small businesses also continue to suffer, and while many have rehired some employees over the summer, many anticipate lay-offs in the coming months.

Data released on Wednesday by the US Bureau of Labour Statistics shows alarming unemployment rates in July in metropolitan areas across the country.

The highest rates were recorded in El Centro, California (26.8 per cent); Yuma, Arizona (24.8 per cent); and Atlantic City-Hammonton, New Jersey (24 per cent) — numbers not seen since the Great Depression in the 1930s.

Los Angeles and New York, the two largest metropolitan areas in the country, both have unemployment rates over 16 per cent.

Nationally, the unemployment rate peaked in April at 14.7 per cent and now stands at 10.2 per cent. The previous peak in the Great Recession was 10 per cent in October 2010.

A new wave of lay-offs by major companies has increased concerns that many job-losses could be permanent.

Economists warn that mass layoffs will continue and that any recovery is likely to falter as long as the coronavirus continues to spread and Congress doesn’t act to extend another round of stimulus payments for the unemployed and for state and local governments.

With reporting from the Associated Press