US jobless claims jump by most since March, approach 1 million

People queue outside a Kentucky Career Centre to get assistance with their unemployment claim in Frankfort, Kentucky, in a file photo from June 18, 2020.
People queue outside a Kentucky Career Centre to get assistance with their unemployment claim in Frankfort, Kentucky, in a file photo from June 18, 2020.PHOTO: REUTERS

WASHINGTON (BLOOMBERG) - Applications for US state unemployment benefits surged last week by the most since late March, pointing to persistent labour-market pain as coronavirus infections continue to soar and potentially adding to momentum for a larger federal stimulus plan.

Initial jobless claims in regular state programs rose by 181,000 to 965,000 in the week ended Jan 9, according to Labor Department data Thursday (Jan 14) that showed a broad number of states with large increases. On an unadjusted basis, the figure jumped to 1.15 million. US stock futures and the yield on the 10-year Treasury maintained gains after the report.

Continuing claims in state programs - an approximation of the number of people receiving ongoing benefits - climbed by 199,000 to 5.27 million in the week ended Jan 2. Both initial and continuing figures exceeded the highest estimates in Bloomberg's survey of economists.

"The restrictions imposed to combat the third Covid wave clearly have done great damage, but it's not obvious that the incremental hit is still increasing, especially since the Paycheck Protection Program has reopened," Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note.

"Claims will drift sideways, more or less, over the next two to three months, before restrictions on the services sector can be gradually eased as vaccination brings herd immunity into sight."

Jobless claims have exceeded 750,000 each week since virus cases started surging again late last year, underscoring the impact of infection fears and business restrictions on employment. Vaccine distribution should help restore economic activity in the coming months, but the first quarter could continue to bring labor market weakness until inoculations reach a critical mass.

The US$900 billion (S$1.2 trillion) pandemic aid package recently approved should provide some relief for workers and businesses in the first quarter. President-elect Joe Biden is expected to release details Thursday of a proposed additional relief package that could further extend unemployment benefits and aid cities and states.

Biden last week put the "entire package" at "trillions of dollars," and many Democrats believe it will be as much as $2 trillion, while others expect the coronavirus-only portion will fall closer to the value of the last package. The initial filings far exceeded the worst days of the 2007-09 recession and may skew negotiators toward a bigger relief package.

Among states, Illinois and Florida reported initial claims exceeding 50,000 last week, while California and Kansas topped 20,000 on an unadjusted basis Pandemic Unemployment Assistance, a program for self-employed and gig workers, saw 284,470 initial claims last week on an unadjusted basis, an increase of more than 123,000 from the prior week.

In the week ended Dec 26, there were 4.17 million continuing claims for Pandemic Emergency Unemployment Compensation, which provides extended jobless benefits for those who have exhausted their regular state benefits.