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New unemployment claims remain high in latest weekly report

The closed sign of a former restaurant in Houston. The Labor Department said 961,000 workers filed initial claims for state unemployment benefits last week.
The closed sign of a former restaurant in Houston. The Labor Department said 961,000 workers filed initial claims for state unemployment benefits last week.Melissa Phillip/Associated Press

Fresh evidence of the job market’s fragility emerged Thursday, underscoring the economic challenges for the Biden administration and heightening the pressure for a fresh wave of stimulus from Washington.

The Labor Department said 961,000 workers filed initial claims for state unemployment benefits last week. On a seasonally adjusted basis, new claims totaled 900,000.

The figures represented a decline from the previous week but remain extraordinarily high by historical standards and have recently reverted to levels not seen since midsummer. In the comparable week a year ago, before the pandemic, there were 282,000 initial claims.

In Massachusetts, about 25,500 individuals filed new claims for unemployment benefits last week, down about 5,600 from the week prior. Another 6,351 filed new claims for the Pandemic Unemployment Assistance program, which offers benefits to gig workers and others who do not qualify for traditional benefits, an increase of about 1,700.

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“Unfortunately, the labor market started 2021 with very little momentum,” said Greg Daco, chief US economist at Oxford Economics. “There hasn’t been any improvement, and if anything, there has been deterioration.”

New restrictions and lockdowns amid a surge in cases in many parts of the country have decimated employment in the restaurant and leisure and entertainment industries, with little relief in sight.

“The level of layoffs is very high, and the virus is causing serious disruption,” said Rubeela Farooqi, chief US economist at High Frequency Economics. “It’s going to be pretty rough over the next few months.”

The Labor Department reported earlier this month that employers cut payrolls by 140,000 in December, the first decline since the mass layoffs of last spring.

The beginning of vaccinations in December provided optimism about a quick turnaround, but the slow rollout in many parts of the country has set back those hopes. On the other hand, the passage of a $900 billion stimulus package last month and the prospect of more aid under the Biden administration allayed fears of a double-dip recession.

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Among the emergency federal programs extended by the recent legislation was Pandemic Unemployment Assistance, which helps freelancers, part-time workers, and others normally ineligible for state jobless benefits. A total of 424,000 new claims were filed under the program last week, up from 285,000 the previous week.

Daco said uncertainty about the program’s continuation might have held back claims late last year, so the jump last week might represent belated filings as well as the overall weakness of the labor market.

But Pandemic Unemployment Assistance and a $300 weekly supplement to state and federal unemployment benefits will both expire in mid-March without new legislative action.

Farooqi said meaningful improvement in the economy was unlikely by then.

“More aid is needed for households and businesses,” she said. “Many businesses will shut down, and a lot of jobs will be lost without it. That poses a downside risk for the economy in the near term.”

Overall, the best bet for the economy is more vaccinations, said Carl Tannenbaum, chief economist at Northern Trust in Chicago.

“There is no better economic stimulus than a successful vaccine rollout,” he said. “It will reduce the risk of human interaction and provide a basis on which different types of businesses can open more durably.”