WRAPUP 2-U.S. weekly jobless claims drop; but labor market recovery losing steam
*Trade deficit jumps 18.9% to $63.6 billion in July. WASHINGTON, Sept 3- The number of Americans filing new claims for unemployment benefits fell below 1 million last week for the second time since the COVID-19 pandemic started in the United States, but that does not signal a strong recovery in the labor market. “There are new seasonal adjustment factors this week…
* Weekly jobless claims fall 130,000 to 881,000
* Continuing claims decrease 1.238 million to 13.254 million
* Trade deficit jumps 18.9% to $63.6 billion in July
By Lucia Mutikani
WASHINGTON, Sept 3 (Reuters) – The number of Americansfiling new claims for unemployment benefits fell below 1 millionlast week for the second time since the COVID-19 pandemicstarted in the United States, but that does not signal a strongrecovery in the labor market.
The drop in initial claims to a five-month low reported bythe Labor Department on Thursday largely reflected a change inthe methodology it used to address seasonal fluctuations in thedata, which economists complained had become less reliablebecause of the economic shock caused by the coronavirus crisis.
There are growing signs the labor market recovery from thedepths of the pandemic in mid-March through April is faltering,with financial support from the government virtually depleted.
“There are new seasonal adjustment factors this week whichbrings down the joblessness slightly,” said Chris Rupkey, chiefeconomist at MUFG in New York. “The labor market looks just asbad as it was and it will be a miracle if economic growth cancontinue at such a fast clip during this recovery if it has todrag along millions and millions of workers without paychecks.”
Initial claims for state unemployment benefits fell 130,000to a seasonally adjusted 881,000 for the week ended Aug. 29.Economists polled by Reuters had forecast 950,000 applicationsin the latest week.
The Labor Department has switched to using additive factorsto more accurately track seasonal fluctuations in the series.The government dropped the multiplicative seasonal adjustmentfactors it had been using because they could cause systematicover-or under-adjustment of the data in the presence of a largeshift in the claims series.
Unadjusted claims rose 7,591 to 833,352 last week. Theincrease in the raw numbers, which many economists prefer tofocus on, added to a raft of data suggesting the labor marketrecovery was ebbing.
A report on Wednesday from the Federal Reserve based oninformation collected from the U.S. central bank’s contacts onor before Aug. 24 showed an increase in employment. The Fed,however, noted that “some districts also reported slowing jobgrowth and increased hiring volatility, particularly in serviceindustries, with rising instances of furloughed workers beinglaid off permanently as demand remained soft.”
Private employers hired fewer workers than expected inAugust. In addition, data from Kronos, a workforce managementsoftware company, and Homebase, a payroll scheduling andtracking company, showed employment growth stagnated last month.
Another report on Thursday showed job cuts elevated inAugust amid layoffs by airlines. United Airlines said onWednesday it was preparing to furlough 16,370 workers on Oct. 1.
Stocks on Wall Street opened lower. The dollar wassteady against a basket of currencies. U.S. Treasury pricesrose.
TRADE DEFICIT WIDENS
The weak labor market reports raise the risk of a sharpslowdown in job growth in August than is currently anticipatedby financial markets. The government is scheduled to publishAugust’s employment report on Friday.
According to a Reuters survey of economists nonfarm payrollslikely rose by 1.4 million jobs last month after increasing by1.763 million in July. That would leave nonfarm payrolls about11.5 million below their pre-pandemic level.
The claims report also showed the number of people receivingbenefits after an initial week of aid dropped 1.238 million to13.254 million in the week ending Aug. 22. Part of the decreasein so-called continuing claims was likely because of peopleexhausting eligibility for benefits.
At least 29.2 million people were receiving unemploymentbenefits under all programs in the week ended Aug. 15.
“It is sobering to think, four months after the worst monthof the lockdown recession, the number of people receivingassistance remains millions higher than at any time prior to thepandemic,” said Chris Low, chief economist at FHN in New York.
Fiscal stimulus boosted economic activity after nearlygrinding to a halt following the shuttering of nonessentialbusinesses in mid-March to control the spread of COVID-19. Thatset up the economy, which plunged into recession in February,for a sharp rebound in the third quarter.
A $600 weekly unemployment supplement expired in July andfunding programs for businesses have also lapsed, leaving theoutlook for growth uncertain. Also clouding the growthprospects, the trade deficit jumped 18.9% to a 12-year high of$63.6 billion in July, driven by a record surge in imports.
While the rise in imports could be blunted by an increase ininventories, export growth was moderate in July. That couldthreaten a recent acceleration in manufacturing activity.(Reporting by Lucia MutikaniEditing by Chizu Nomiyama and Paul Simao)
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