Even as the economy shows signs of recovery, employers continue to lay off large numbers of workers, a sign of how long it will take for the labor market to fully recover from the pandemic.
The pressure became clear on Thursday when a new report from the Labor Department showed an increase in initial jobless claims last week after a sharp drop in the previous week.
Although unemployment claims have fallen from their highs at the beginning of the year when a surge in coronavirus cases led to new business restrictions, layoffs remain extraordinarily high by historical standards.
A spike in claims after devastating Texas winter storms added to the surge last week, but the weakness was broad-based.
“We knew that there was a certain backlog in Texas and that the claims would probably rise again,” said Gregory Daco, chief economist at the US accounting firm Oxford Economics. “Despite the expectation of record growth in 2021, the labor market is still quite fragile.”
In the week that ended Saturday, a total of 748,000 workers filed their first claims for unemployment benefits, 32,000 more than the week before. In addition, 437,000 new claims were submitted for Pandemic Unemployment Assistance, a federal program for freelancers, part-time workers, and others who are not routinely eligible for government benefits. This corresponds to an increase of 9,000.
None of the figures are seasonally adjusted. Seasonally adjusted, the new state claims amounted to 745,000, an increase of 9,000.
“We are still dealing with millions of unemployed Americans,” said Gus Faucher, chief economist at PNC Financial Services Group. “It will take a long time to get back to normal, but employment growth will be stronger as we get closer to spring.”
Another reading will take place on Friday when the Department of Labor reports on recruitment and unemployment in February. Economists expect an increase of around 200,000 jobs for the survey with an unchanged unemployment rate of 6.3 percent.
In January the labor market had a weakness: employers only added 49,000 jobs. That gave little hope to nearly 10 million unemployed Americans.
Updated
March 4, 2021, 2:57 p.m. ET
Nevertheless, the states are easing the activity restrictions, which should improve the attitude picture. And despite the surge in claims over the past week, most experts expect the labor market to improve in the coming months.
Texas Governor Greg Abbott said Tuesday the state is lifting all business restrictions and removing its mask requirements. This was criticized by President Biden. Elsewhere, officials have been more cautious – parks and playgrounds have reopened in Chicago, while restaurant capacity restrictions have been lifted in Massachusetts.
Restaurants and bars were among the hardest hit companies during the pandemic, but as vaccination efforts pick up, the industry could pick up some momentum again by the summer.
“The job market is gradually improving,” said Scott Anderson, chief economist at Bank of the West in San Francisco. “Employment growth may accelerate as early as the second quarter, with a significant increase in leisure, hospitality and travel.”
President Biden’s $ 1.9 trillion stimulus package, which appears close to Congressional approval, should give the economy an additional boost in the coming months, Anderson said.
In addition to providing $ 1,400 checks to many Americans, the legislation will extend unemployment benefits, which expires this month, while providing hundreds of billions of dollars to states and cities that are major employers.
“The amount of government spending moves the needle,” he said. By the summer, consumer spending should return to pre-pandemic levels, but it could be another two years for the labor market to fully recover.
Mr. Anderson expects annualized growth of 7.2 percent (1.75 percent quarterly) for the second quarter, driven by consumer spending and the Washington aid infusion.
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