The number of Americans who filed new claims for unemployment benefits last week totaled 1.434 million, the Labor Department reported Thursday, roughly in line with expectations, as the coronavirus pandemic continues to ravage the U.S. economy. It was the 19th straight week in which initial claims totaled at least 1 million and the second consecutive week in which initial claims rose after declining for 15 straight weeks.
Economists polled by Dow Jones had expected claims to rise to 1.45 million for the week ending July 25.
In a separate report, the government said second-quarter gross domestic product plunged a historic 32.9% on an annualized basis. Although it wasn’t as bad as the expected 34.7% decline, it was the worst drop ever, with the closest previously coming in mid-1921.
The U.S. economy added 4.8 million jobs in June, according to data released Thursday by the Labor Department, as the gradual easing of coronavirus-related restrictions helped more businesses reopen and bring back workers.
The unemployment rate also fell to 11.1 percent last month, according to the report, as more workers who were laid off earlier this year were able to return to their pre-pandemic jobs.
Economists expected the U.S. to add anywhere between 1 million and 3 million jobs for the month after the U.S. added 2.7 million in May, according to revised figures, despite widespread predictions of another decline.
It’s a cash cliff millions of Americans face this summer as the emergency benefits — which lifted U.S. consumer incomes by a record 10.8% in April — expire. The loss of that safety net looms in the weeks ahead, well before a sustained recovery is likely to take hold from the sudden and deep recession brought on by the novel coronavirus. Personal income dropped 4.2% in May, data Friday showed.
The $600 supplement Congress added to weekly unemployment benefits is due to expire July 31.
Without new support, recipients face a substantial loss of income – particularly devastating for those like the Ramirez family who worked in hard-hit sectors like hospitality where new jobs are scarce. During high unemployment and a still-raging pandemic, the end of enhanced jobless benefits could drag on consumer spending, set off a wave of missed rent and mortgage payments and translate to a slower recovery, economists said.
Stocks fell for a second day on Thursday following the release of disappointing unemployment data while traders grappled with a rising number of coronavirus cases. The Dow Jones Industrial Average traded 200 points lower, or 0.8%. The S&P 500 slid 0.7% while the Nasdaq Composite dropped 0.8%. An additional 1.48 million Americans filed for unemployment benefits last week, the Labor Department said. Economists polled by Dow Jones expected a print of 1.35 million. This marks the second straight week that U.S. jobless claims data were worse than expected.
“No matter which way you look at it, over a million unemployed is a very bad thing,” said Mike Loewengart, managing director of investment strategy at E-Trade. “It will take some time to unwind the structural damage COVID has caused across the world.”
“While it’s certainly uncomfortable, the everyday investor should be used to ongoing market volatility at this point,” Loewengart said.
Top economists are warning lawmakers not to get transfixed by seemingly rosy data showing the economy finding its legs following the coronavirus pandemic. The recovery remains wobbly — and may get worse as some of the bailout funds expire.
Reports out Tuesday showed retail sales in May and home builder sentiment in June rebounded surprisingly sharply, helping power a stock market rally that pushed the S&P 500 up 2 percent.
But as traders bought on that news, Federal Reserve Chair Jerome Powell was urging senators not to grow complacent. “Significant uncertainty remains about the timing and strength of the recovery,” he said in virtual testimony before the Senate Banking Committee. “Until the public is confident that the disease is contained, a full recovery is unlikely.”