Jobless claims rose to 1.42 million last week from 1.31 million in the prior week, the first gain in almost four months as the widening COVID-19 pandemic cut into economic activity.
A second measurement known as continuing claims that tracks the number of Americans receiving ongoing unemployment benefits fell to 16.2 million for the week ended July 11, the seventh consecutive decline, the Labor Department said Thursday.
Wells Fargo economists described the gain in jobless claims as “one of the clearest signs yet that the U.S. recovery is stalling.” Some areas of the country have restricted business activity to prevent their hospital ICUs from being overwhelmed with COVID-19 patients.
“Watch your step, there is a cliff ahead,” the report said. “The 18th consecutive week of initial claims over one million illustrates the relentless nature of the current crisis.”
The gain in jobless claims will be added incentive for the Senate to extend the beefed-up unemployment benefits that were included in March’s CARES Act and are set to expire July 31, the Wells Fargo economists said.
Unemployment benefits, which are administered by states, typically replace about half of a person’s prior salary. The CARES Act’s extra $600 a week payment was aimed at keeping Americans who lost their jobs because of the pandemic current on bills such as mortgages or rent.
“The generosity of the federal emergency benefits, which are set to expire at the end of next week, has shored up spending power,” the Wells Fargo report said.
The House of Representatives passed the Heroes Act in May that included a provision to extend the benefit through January, but the Senate didn’t act on it and went on a two-week vacation before Independence Day that ended this week.
Because July 31 is a Friday, and many state unemployment systems have the week ending on a Saturday, it means this is the last week of the extra payment for millions of Americans.
“With layoffs rising again, unemployment still near a record high and a dearth of jobs available as the pandemic has decimated activity, we have a hard time believing Congress will let them fully lapse,” the economists said. “The labor market simply remains too weak with dire implications for spending and the rest of the economy.”