Federal Reserve Chair Jerome Powell on Wednesday warned of an "extended period" of weak growth and stagnant incomes. The economy lost a staggering 20.5 million jobs in April, the steepest plunge in payrolls since the Great Depression of the 1930s. Economic output dropped in the first quarter at its sharpest rate since the 2007-09 Great Recession.
Initial claims for state unemployment benefits totalled a seasonally adjusted 2.981 million for the week ended May 9, the government said. While that was down from 3.176 million in the prior week and marked the sixth straight weekly drop, claims remain astoundingly high.
Economists polled by Reuters had forecast applications for unemployment benefits totaling 2.5 million in the latest week. Claims have been gradually decreasing since hitting a record 6.867 million in the week ended March 28.
In addition to weak demand causing layoffs in industries and jobs not initially affected by the coronavirus shutdowns, the processing of application backlogs, which accumulated as state unemployment offices were overwhelmed by the unprecedented wave of applications, was keeping claims elevated, economists said.
The latest numbers lifted to 36.5 million the number of people who have filed claims for unemployment benefits since mid-March, or more than one in five workers losing their job. Claims will be closely watched in the coming weeks for signs whether companies rehire workers as businesses reopen.
Though many parts of the country are reopening, businesses and factories are operating well below capacity. Unadjusted claims for Florida and Georgia, which have led the easing of restrictions on businesses, increased last week.
While some businesses have accessed loans from an almost $3 trillion fiscal package, which could be partially forgiven if they use the credit for employee salaries, many small enterprises are expected to close permanently, leaving some of the 21.4 million people who lost their jobs in March and April out of work for a long time.
But there is some cautious optimism. Thursday's claims report also showed the number of people receiving benefits after an initial week of aid increased only 456,000 to a record 22.833 million for the week ending May 2. The so-called continuing claims data is reported with a one-week lag and remains well below the cumulative number of initial claims. Some economists view it as a better gauge of the labor market's health.
Economists believe April marked the trough in job losses and expect May payrolls to drop at least 15 million.
The Labour Department also reported that 3.4 million people had their applications for Pandemic Unemployment Assistance (PUA) processed in the week ending April 25.
The PUA program covers gig workers and many others who do not qualify for regular insurance unemployment, but have been forced out of work because of COVID-19.