Unemployment claims jump, casting new shadow over US economy

As per the Labor Department, more than 947,000 workers filed new claims for state unemployment benefits last week

When coronavirus cases began rising across the country this fall, economists sounded a warning: Without government aid, layoffs were sure to follow.

Now those dire predictions are coming true.

More than 947,000 workers filed new claims for state unemployment benefits last week, the Labor Department said Thursday. That was up sharply from the week before, more than reversing a one-week dip that many economists attributed to the Thanksgiving holiday. Applications have now risen three times in the last four weeks and are up nearly a quarter-million since the first week of November.

Nearly 428,000 applied for Pandemic Unemployment Assistance, a federal program that covers freelancers, self-employed workers and others who don’t qualify for regular state benefits. That figure, too, was a sharp increase from the previous week.

Unemployment filings during the pandemic have been far above levels recorded in previous recessions. But through most of the fall, they had been edging down week after week, providing some hope that businesses could avoid another round of job cuts. That hope is fading.

“It’s very clear the third wave of the pandemic is causing businesses to have to lay people off and consumers to cut back spending,” said Daniel Zhao, senior economist for career site Glassdoor. “It seems like we’re in for a rough winter economically.”

Colleen Levy was laid off in March at a catering company in Ann Arbor, Michigan when the pandemic led to the mass cancellation and postponement of events in the area. But she was rehired in a few weeks as the company began offering meals for home delivery.

The company scraped together business over the summer through a combination of online ordering and events, many of them outdoors. A federal loan through the Paycheck Protection Program helped.

But business slowed this fall as the weather in Michigan turned cold and coronavirus cases there began to rise. When the state government imposed new restrictions on gatherings last month, Levy and her colleagues knew the business would have to shut down.

“We pretty much all knew that that was the end for us,” she said. She already had her things packed up when her boss broke the news.

Levy, 25, is living with an ex-boyfriend, who is cutting her a deal on rent. And unlike many in her industry, she has been employed for most of the pandemic, although at reduced hours and without the tips she could normally count on to supplement her wages. But she isn’t sure when she’ll find steady work again.

“It’s like, ‘Hey, your industry’s dead, and you aren’t qualified for any other jobs for the next year,’ ” she said. “Eventually parties will exist again, but I don’t know how long that ‘eventually’ will be.”

Unlike in the spring, when tens of millions of people lost their jobs in a matter of weeks, the recent increase in layoffs has been gradual. Virtually no one is predicting a repeat of March and April when as many as 6 million people a week filed for unemployment benefits.

“This is all a slow-moving disaster, not like the spring where it happened so quickly,” said Ian Shepherdson, chief economist for Pantheon Economics.

But it is a disaster nonetheless, he said. As governments order restaurants and retailers to shut down or reduce capacity, and as consumers pull back on traveling, shopping and other activities that put them at risk, it will lead to layoffs and business failures, which will ripple through the economy. A growing number of forecasters warn that the economy could contract early next year.

The monthly jobs report released last Friday showed that hiring slowed sharply in early November and that some of the sectors most exposed to the pandemic, like restaurants and retailers, cut jobs for the first time since the spring. More up-to-date data from private sources suggest that the slowdown has continued or deepened since the November survey was conducted.

“Every month, we’re just seeing the pace of the recovery get slower and slower,” said AnnElizabeth Konkel, an economist with job site Indeed. Now, she said, the question is, “Are we actually going to see it slide backward?”

Many economists say the recovery will continue to slow if the government does not provide more aid to households and businesses. After months of gridlock in Washington, prospects for a new round of federal help have grown in recent days, with congressional leaders from both parties signaling their openness to a compromise and the White House proposing its own $916 billion spending plan Tuesday. But wide divisions persist on key issues.

The stakes are particularly high for jobless workers depending on federal programs that have expanded and extended unemployment benefits during the pandemic. Those programs expire later this month, potentially leaving millions of families with no income during what public health researchers warn could be some of the pandemic’s worst months.

It isn’t clear exactly how many people stand to lose benefits. The Labor Department report Thursday showed that more than 13 million people were enrolled in the two programs. But a recent report from the Government Accountability Office found that the Pandemic Unemployment Assistance program has been plagued by fraud and overcounting, rendering some of the data unreliable.

By any accounting, however, millions stand to lose their income if the programs end. Many have drawn down savings, leaving them with little financial cushion and putting them at risk of eviction or foreclosure.

“They’re going to be very quickly forced to make a lot of bad financial decisions to put food on the table,” said Andrew Stettner, a senior fellow at the Century Foundation, a progressive group. “It can be something you can’t recover from or that takes years to recover from.”

Stephanie Freed, an electrician and lighting designer in New York City, was setting up for a gala at the American Museum of Natural History in the spring when the event was postponed for a month. That was pushed back to July, then to the fall. Now the event has been postponed indefinitely — and Freed hasn’t worked since March. Her state unemployment benefits ran out weeks ago, leaving her relying on the federal pandemic extension.

So Freed, 32, is living in her parents’ basement in Virginia and renting out her New York apartment. Many other unemployed people aren’t so lucky, she said — but many are still trying to help each other out.

“Mutual aid between unemployed people can only go so far,” she said. “People are donating $5 to each other’s GoFundMes in a perpetual circle just trying to survive.”

Earlier this year, Freed and a friend started an online effort to organize unemployed workers and push Congress to extend the pandemic programs and to revive the $600 a week in supplemental benefits that expired over the summer. The group has met with senators and flooded congressional offices with phone calls. But Freed said she was frustrated by the slow pace of progress and worried about what would happen if benefits expired.

“We already have monumental lines for food; we already have people getting kicked out of their homes,” she said. “I don’t know how we recover from it.”