The number of Americans filing initial claims for jobless benefits rose back above 1 million last week, increasing for the first time in three weeks, as the COVID-19 pandemic fueled layoffs.
“The labor market’s recovery remains precarious,” Wells Fargo economists said in a statement after the Labor Department issued a report on Thurday showing claims rose to 1.1 million. “With claims still hovering around 1 million, the jobs recovery still has a long ways to go.”
Economists have said for months that the path of the economy depends on whether the pandemic is contained. U.S. GDP contracted a record 32.9% in the second quarter from a year ago, the Commerce Department said on July 30.
Currently, the U.S. leads the world in COVID-19 infections and deaths. About 22% of deaths recorded during the pandemic have occurred in the U.S., which has 4.2% of the world’s population.
The number of COVID-19 confirmed cases in the U.S. rose to more than 5.5 million on Thursday, about a quarter of the globe’s recorded cases and 2 million more than Brazil, the No. 2 nation, according to Johns Hopkins University data.
“Uncertainty surrounding the economic outlook remained very elevated, with the path of the economy highly dependent on the course of the virus and the public sector’s response to it,” said minutes from the Federal Reserve’s July meeting released on Wednesday.
Fed officials noted it was “uncertain” whether additional government support would come through, meaning help from Congress. Fed Chairman Jerome Powell has urged lawmakers during Congressional testimony to support the economy with additional spending.
Senate Leader Mitch McConnell (R-KY) proposed a coronavirus relief package on July 27, two months after the House of Representatives passed the Heroes Act that extended the $600-a-week jobless benefit through January. McConnell’s version that cut the weekly amount was never debated.
McConnell admitted four days later during an interview on a Kentucky radio station, “I think there are 15-20 of my guys that are not going to vote for anything.”
With so many GOP senators opposed to additional funding, it means McConnell needs support from Democratic senators to pass anything. Negotiations on a compromise fell apart last week.
Leader Nancy Pelosi (D-CA) called the House back from its traditional August vacation this week, but the Senate remains on summer break and currently isn’t scheduled to be back in session until Sept. 7.
President Donald Trump signed four directives on Aug. 8 aimed at addressing the lapse in beefed-up unemployment benefits and other issues such as the expiration of an evictions moratorium.
Moody’s Investors Service said in a Thursday report the directives aren’t enough.
Trump’s directives “are subject to implementation risks and their limited scope is unlikely to offset the ongoing damage to economic activity resulting from the pandemic,” the Moody’s report said.
For example, the directive touted by Trump as an extension of the eviction moratorium in the CARES Act only orders various federal departments and agencies to “consider” and “review” ways to keep renters in homes using existing government programs.
“While negotiations face big hurdles, we expect Congress to ultimately pass legislation that replaces, at least to some degree, the recently expired relief measures for the unemployed and for other segments of the economy still reeling from the pandemic,” the Moody’s report said.
“However, the delay in providing new support will dent unemployed workers’ purchasing power and ability to meet their financial obligations, with negative implications for consumer-facing sectors such as retail, rental housing and consumer finance.”