Unemployment Claims Expected to Edge Higher as Extra $300 Payments Start

By Eric Morath

The number of workers seeking unemployment benefits is expected to have edged higher at the start of the year, as an extra $300 in weekly payments kicked in from the coronavirus aid package signed into law last month.

Economists project initial jobless claims to regular state programs, a proxy for layoffs, to increase modestly to 815,000 during the week ended Jan. 2, according to a Wall Street Journal survey. The Labor Department will publish the latest data at 8:30 a.m. ET on Thursday.

Unemployment claims have remained at high levels during the pandemic, holding at four times their pre-pandemic average at around 800,000 a week through the fall and into the winter. Claims peaked at nearly seven million in the spring, when a majority of states issued stay-at-home orders early in the pandemic. The pre-pandemic peak was 695,000.

In recent weeks some states have imposed new restrictions as hospitalizations due to the disease reached new highs.

"The economy is at a bigger crossroads now than we were last fall," said Alfredo Romero, economist at North Carolina A&T State University, noting the discovery of more contagious strains of the virus in the U.S. "It's now a race between the speed of vaccinations and the speed of contagion."

He said public concern over the virus and renewed lockdowns by some state officials could cause overall employment to contract in the coming months for the first time since last spring.

President Trump signed a $900 billion Covid-19 relief package on Dec. 27 that, among other measures, added a $300-a-week supplement for those receiving unemployment benefits and extended two pandemic-specific programs used by about 13 million people.

The increased payment is on top of unemployment benefits offered by states, which may draw in additional applicants as the extra payments are distributed. Workers aren't required to apply for benefit the week that they are laid off.

In addition, weekly jobless claims figures can be volatile during holiday periods because of challenges with seasonal adjustment. A four-week moving average of initial jobless claims, which smooths out weekly variation, ticked higher in recent weeks, a sign of a loss of momentum in the labor market recovery.

A more-detailed look at the December jobs market will be released by the Labor Department on Friday. Economists project the employment report will show employers added 50,000 jobs in December. That would be the smallest job gain since April, when the economy shed 20 million jobs. Mr. Romero said he doesn't anticipate job creation to markedly accelerate until vaccines become widely available, perhaps in the second half of the year.

There have been other recent signs of slowing economic momentum. Household spending declined in November, marking its first retreat in seven months, and household income also fell, according to the Commerce Department. New and existing home sales declined in November from the previous month.

The manufacturing sector, buoyed by consumers shifting purchases to goods from services, remains a source of strength. Data firm IHS Markit said its purchasing managers index for the U.S. manufacturing sector recorded in December its largest monthly improvement since September 2014.

Government stimulus checks, enhanced unemployment benefits and additional aid for businesses could all support economic growth earlier this year. The new stimulus law increases unemployment assistance in every state by $300 a week through March 14 and extended two federal pandemic programs that otherwise would have paid out their final benefits in December.

One program provides benefits for the self-employed and others not normally eligible for jobless aid, and the other offers up to 13 weeks of additional payments for individuals who exhausted their other benefits.

Nino Dean, who lost his job at a luxury jewelry retailer in New York City's SoHo neighborhood last spring, said the additional benefits will allow him to cover his rent payments. He hopes they last long enough for restrictions to be lifted, allowing more businesses to hire. He has applied for fashion retail positions, but few companies were hiring. Mr. Dean said he borrowed about $1,100 from friends to pay his rent, and is buying groceries with food stamps.

"Now I'm applying for just any job. I applied to CVS, Walmart, whatever I can get," said Mr. Dean, who is 45 years old. He said he feels lower-paying retailers pass him over because they expect he will leave for a better-paying position once one becomes available.

Some businesses are hiring. Jan Riggins, general manager of two Express Employment Professionals staffing offices in Fort Worth, Texas, said she is trying to fill warehouse and logistics positions that have been growing rapidly the past six months.

Wages for those jobs have improved, starting between $13 and $16 an hour, she said. However, working full time at that rate is likely near what many would receive on unemployment benefits with the $300 supplement. The average weekly state payment was $319.42 for the 12 months ended in November.

Ms. Riggins said job seekers often call to ask about work-from-home positions, but she said there are far fewer of those available than jobs that require an employee to report to a warehouse or factory, or be on the road.

"The biggest impediment is finding people that want to work," she said. "We've never had such a high level of no-shows for their first day on the job." She added some people can't work outside their homes because they need to care for children, and others are restricted from reporting by employers because they recently traveled for the holidays.

Kim Mackrael contributed to this article.

Write to Eric Morath at [e-mail]

(END) Dow Jones Newswires

01-07-21 0544ET