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Virus layoffs in US top 45.7 million

FRANKFORT, KY: Hundreds of unemployed Kentucky residents wait in long lines outside the Kentucky Career Center for help with their unemployment claims on Friday in Frankfort, Kentucky. – AFP

WASHINGTON: Layoffs caused by the coronavirus pandemic in the United States have passed 45.7 million, raising fears that despite some positive signs, the economy faces a halting recovery from the downturn.

Another 1.5 million US workers filed new claims for unemployment benefits last week, the Labor Department said Thursday, a decrease of only 58,000 from the prior week and higher overall than analysts expected.

An additional 760,526 filed claims under a program for those who would not normally be eligible for benefits, while the insured unemployment rate showing people still receiving aid was unchanged as of the week ended June 6 at 14.1 percent, with 20.5 million people getting benefits.

“Based on this side of the firing and hiring equation, labor market improvement is muted,” tweeted Mohamed El-Erian, chief economic adviser at Allianz. The world’s largest economy has seen a protracted downturn since businesses began closing in mid-March to stop the spread of the coronavirus, with the unemployment rate climbing to 13.3 percent in May and millions of layoffs reported each week. In an interview with The Wall Street Journal, President Donald Trump reiterated his expectation that the economy would recover by the time voters decide whether to give him a second term.

“We will have created a lot of jobs prior to November 3,” Trump told the newspaper on Wednesday. “I expect a tremendous increase in GDP. And we’ll be heading for the top. We’ll be back.”

Claims ‘still so high’

The wave of jobless claims peaked in late March and has been decreasing ever since. Yet it remains well above any single week reported during the global financial crisis in 2008, even as states move to reopen businesses and get consumers spending again.

Those efforts have paid off in sectors such as retail sales, which the Commerce Department said spiked 17.7 percent in May, nearly double the gain analysts expected, while other data has shown growing optimism among consumers and businesses. Wall Street has also recovered much of its losses for the year after plunging as the virus arrived, though markets had an uneventful session Thursday, with traders holding back as they weighed the claims data.

“It’s not clear why claims are still so high; is it the initial shock still working its way up through businesses away from the consumer-facing jobs lost in the first wave, or is it businesses which thought they could survive now throwing in the towel, or both?” said Ian Shepherdson of Pantheon Macroeconomics. “Either way, these are disappointing numbers and serve to emphasize that a full recovery is going to take a long time.”

In congressional testimony earlier in the week, Federal Reserve Chair Jerome Powell said that unless consumers feel confident COVID-19 has been defeated, “a full recovery is unlikely.” “The levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery,” Powell told the Senate Banking Committee.

The central bank chief has predicted the contraction of GDP in the April-June quarter “is likely to be the most severe on record,” and called for more support to the economy. But the Fed can only lend, not spend, and it will be up to Congress to decide whether to act ahead of the expiration of parts of the $2.2 trillion CARES Act stimulus package in the coming weeks.

The United States has seen the world’s worst coronavirus outbreak with more than 117,000 deaths and 2.1 million cases diagnosed.

The epicenter has shifted from New York and states in the northeast to the south and west of the country.

Meanwhile, the US current account deficit dipped to a near two-year low in the first quarter as the COVID-19 pandemic restricted the flow of goods and services, while companies continued to repatriate profits back home. The Commerce Department said on Friday the current account deficit, which measures the flow of goods, services and investments into and out of the country, slipped 0.1 percent to $104.2 billion, the smallest since the second quarter of 2018. A drop in imports and income payments narrowly outpaced a decline in exports and income receipts.

Data for the fourth quarter was revised to show the gap narrowing to $104.3 billion, instead of $109.8 billion as previously reported. Economists polled by Reuters had forecast the current account gap shrinking to $103 billion in the January-March quarter.

The current account gap represented 1.9 percent of gross domestic product in the first quarter, the smallest share since the third quarter of 2017. —Agencies

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