Initial jobless claims fell to 1.2 million last week, down from 1.4 million in the prior period, declining to a pandemic low that was almost twice as high as the worst measure during the financial crisis a decade ago.
Continuing claims, a tally of the number of Americans receiving unemployment benefits, dropped to 16.1 million in the week ended July 25, the lowest since mid-April, the Labor Department said in a Thursday report.
“The threshold on what is good news has shifted dramatically down,” said Diane Swonk, chief economist of Grant Thorton in Chicago. “Good news that initial and continuing claims fell. Bad news that they are still larger – by a significant amount – than anything we have seen in past recessions.”
Lawmakers are continuing negotiations in Washington D.C. on COVID-19 relief legislation, including the issue of the extra $600 a week benefit for jobless Americans, aimed at fully replacing prior salaries, that expired on July 31 as part of the CARES Act.
Typically, unemployment benefits only replace about 50% of a person’s prior salary, which would make it difficult to pay mortgages and rents at a time when many industries are not hiring.
U.S. GDP contracted a record 32.9% in the second quarter from a year ago, the Commerce Department said last week. Federal Reserve officials including Chairman Jerome Powell have said the U.S. economy won’t be on firm footing until the COVID-19 pandemic is controlled.
“The path of the economy will depend significantly on the course of the virus,” the Fed’s rate-setting Federal Open Market Committee said on July 31. “The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”
The U.S. leads the world in COVID-19 infections with more than 4.8 million confirmed cases as of Thursday, according to data from Johns Hopkins University. That’s 2 million more than the world’s No. 2 nation, Brazil.