The economy seems to be turning a corner, but jobless claims are still in the millions

Although the U.S. economy has shown signs of improvement in recent weeks as lockdown restrictions have eased, millions of Americans are still seeking unemployment aid to make ends meet.


Although the U.S. economy has shown signs of improvement in recent weeks as lockdown restrictions have eased, millions of Americans are still seeking unemployment aid to make ends meet.

Another 1.5 million workers filed for first-time jobless benefits last week, the Department of Labor said Thursday. Initial claims have been falling every week since peaking at 6.9 million in the last week of March. Economists think this means that most job losses due to the pandemic are behind us.

The latest figure from the Labor Department marked the 11th straight weekly decline in applications since they peaked at nearly 7 million in March as the coronavirus shut down much of the economy and caused tens of millions of layoffs. The decline was much smaller, though, than in recent weeks, falling just 58,000.

The total number of people receiving unemployment aid also fell slightly, reflecting the return of many to their old jobs.

Stripping out the seasonal adjustments, initial claims stood at 1.4 million last week. These adjustments smooth out the data in normal times but add unnecessary noise in this unprecedented situation.

Overall, more than 45 million Americans have now for first-time benefits since mid-March.

The job market appears to have begun a slow recovery. In May, employers added 2.5 million jobs, an increase that suggested that the job market has bottomed out. The unemployment rate declined from 14.7% to a still-high 13.3%.

Even with the May hiring gain, nearly 21 million people are officially classified as unemployed. And including people the government said had been erroneously categorized as employed in May and those who lost jobs but didn’t look for new ones, 32.5 million people are out of work, economists estimate.

Continuing claims, which count people who filed for benefits for at least two weeks in a row, stood at 20.5 million. Experts are looking for this number to come down substantially over the summer. If it doesn't, it could mean that the labor market recovery is much slower than hoped.

On top of the regular unemployment benefits, 760,526 workers filed initial claims for pandemic unemployment assistance. These additional benefits were created by Congress to provide aid to independent contractors, the self-employed and gig workers among others.

A tale of two economies

Economic data has been painting a murky picture over the past weeks.

The steady decline in jobless claims follows some other encouraging reports that suggest that the lifting of shutdown orders has sparked some pent-up demand from consumers, whose spending largely drives the economy. Most economic gauges remain far below their pre-pandemic levels, though, and some analysts question whether the recent gains can be sustained, especially if the virus were to surge back.

Last month, retail and restaurant sales jumped nearly 18%, the government said Tuesday, retracing some of the record plunges of the previous two months. Even so, retail purchases remain a sizable 6% below their year-ago levels.

Furniture store sales nearly doubled, and clothing sales nearly tripled, though both remain far below their levels before the coronavirus struck. Clothing store sales are still down 60% compared with a year earlier.

With nearly record-low mortgage rates, applications for home loans reached an 11-year high last week. But even though the number of homes under construction rose in May, they remain substantially below last year’s pace.

That not withstanding, millions of people remain unemployed. More than 20 million jobs vanished at the height of the lockdown and it will take time to rebuild the labor market. Meanwhile, the number of COVID-19 infections is rising in some states, putting the reopening in jeopardy.

Federal Reserve Chairman Jerome Powell reiterated during his Congressional Testimony earlier this week that the pace and strength of the recovery remained uncertain. Powell also said the central bank, as well as the government, might need to do more to support the economy, its workers and those hit hardest by the pandemic recession. The Fed has stressed that minority groups including black, Hispanic and female workers have been overpresented in bearing the brunt of the crisis.

More than 100 economists, including former Federal Reserve Chairwoman Janet Yellen and Chairman Ben Bernanke, sent a letter to Congress urging the government to deploy more stimulus.

The economy and the job market face a raft of uncertainties that could slow or even derail a recovery. Business re-openings have caused spikes of viral infections in nearly half of states, a trend that could lead consumers to pull back again on shopping and dining out and reverse any economic gains.

Restaurants, bars, gyms and movie theaters will likely rehire only a portion of their workforces. Many consumers won’t fully resume their previous habits of shopping, traveling and going out until a vaccine is available.

One key reason why consumer spending has rebounded is that government aid programs, from one-time $1,200 stimulus checks to $600-a-week in supplemental federal unemployment aid, have helped offset the loss of income for laid-off Americans. Yet nearly all the stimulus checks have been issued. And the supplemental federal jobless aid is set to expire July 31.

Other data paints a picture of an economy slowly on the mend. A weekly survey of small businesses by the Census Bureau found that in the week that ended June 6, nearly 10% of small firms said they were hiring. That’s double what it was five weeks ago. About 13% said they were still cutting jobs, less than half of what the figure was in late April.

The Associated Press contributed to this report.