US layoffs remain elevated as 837,000 seek jobless aid

The number of Americans seeking unemployment benefits declined last week to a still-high 837,000, evidence that the economy is struggling to sustain a tentative recovery that began this summer.

The Labor Department’s report, released Thursday, suggests that companies are still cutting a historically high number of jobs, though the weekly numbers have become less reliable as states have increased their efforts to root out fraudulent claims and process earlier applications that have piled up.

California, for example, which accounts for more than one-quarter of the nation’s aid applications, this week simply provided the same figure it did the previous week. That’s because the state has stopped accepting new jobless claims for two weeks so it can implement anti-fraud technology and address a backlog of 600,000 applications that are more than three weeks old.

Overall jobless aid has shrunk in recent weeks even as roughly 25 million people rely upon it. The loss of that income is likely to weaken spending and the economy in the coming months.

A $600-a-week federal check that Congress provided in last spring’s economic aid package was available to the unemployed in addition to each state’s jobless benefit. But the $600 benefit expired at the end of July. A $300 weekly benefit that President Donald Trump offered through an executive order lasted only through mid-September, although some states are still working to send out checks for that period.

A result is that Americans’ incomes and spending are declining or slowing. Total paid unemployment benefits plunged by more than half in August, according to the Commerce Department. Consumer spending did rise 1% that month, down from 1.5% in July. But that increase relied in part on consumers drawing upon their savings.

“Unless employment growth picks up, or additional (government) aid is extended, consumer spending is at risk of slowing dramatically during the second phase of the recovery,” said Gregory Daco, an economist at Oxford Economics.

Other measures of the U.S. economy have been sending mixed signals. Consumer confidence jumped in September, fueled by optimism among higher-income households, though it remains below pre-pandemic levels. And a measure of pending home sales rose in August to a record high, lifted by ultra-low mortgage rates.

Yet some real-time measures indicate that growth has lost momentum with the viral pandemic still squeezing many employers, especially small retailers, hotels, restaurants and airlines, nearly seven months after it paralyzed the economy. An economic index compiled by the Federal Reserve Bank of New York grew in September at a weaker pace than during the summer months.

In its report on jobless claims Thursday, the Labor Department said the number of people who are continuing to receive benefits fell to 11.8 million, extending a steady decline since spring. That suggests that many of the unemployed are being recalled to their old jobs. Another 12 million people are receiving aid under the Pandemic Unemployment Assistance program, which has made the self-employed and gig workers eligible for benefits for the first time.

But the decline in the number of those receiving aid also reflects the fact that tens of thousands of jobless Americans have exhausted their regular state unemployment benefits. Most of them are transitioning to an extended jobless aid program that provides benefits for an additional three months.

Weekly applications for unemployment benefits are typically watched as a proxy for layoffs, although the data has become muddied in recent months. The flood of laid-off workers during the pandemic recession overwhelmed state agencies.

The states’ efforts to clear backlogs and uncover fraud in the new program have made it harder to interpret the government’s report on unemployment benefits. Many economists no longer consider it a clear sign of the pace of layoffs.

Initial jobless claims are stuck above the highest levels reached in the 2008-2009 Great Recession. But last week, economists at Goldman Sachs noted that according to other government data, layoffs have fallen below the peaks of a decade ago.

Still, many large companies are announcing further layoffs.

The Walt Disney Co. said this week that it’s cutting 28,000 jobs in California and Florida, a consequence of the damage it’s suffered from the viral outbreak and the shutdowns and attendance limits that were imposed in response.

Allstate said it will shed 3,800 jobs – 7.5% of its workforce. And tens of thousands of airline workers will lose their jobs this month as federal aid to the airlines expires. The airlines were barred from cutting jobs as long as they were receiving the government assistance.

Late Wednesday, two of them – American and United – announced that they would begin to furlough 32,000 employees after lawmakers and the White House failed to agree on a pandemic relief package that would extend the aid to airlines.

On Friday, the government will issue the jobs report for September, the final such report before Election Day, Nov. 3. Analysts have forecast that it will show a gain of 850,000, which would mark the third straight monthly slowdown in job growth. It would mean that the economy has regained just over half the 22 million jobs that were lost to the pandemic.

The unemployment rate is expected to decline from 8.4% to 8.2%, according to data provider FactSet.