WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits hovered around 1 million last week, suggesting the labor market recovery was stalling as the COVID-19 pandemic drags on and financial aid from the government dries up.
Other data on Thursday confirmed the economy suffered its deepest contraction in at least 73 years in the second quarter because of the disruptions from the coronavirus, with corporate profits declining further.
Though new COVID-19 infections have subsided after a broad resurgence through the summer, many hot spots remain, especially at college campuses that have reopened for in-person learning. With the fiscal stimulus ebbing, signs are growing that the economy’s recovery from the pandemic is slowing. Some economists are dialing back lofty growth estimates for the third quarter.
Initial claims for state unemployment benefits fell 98,000 to a seasonally adjusted 1.006 million for the week ended Aug. 22, the Labor Department said. Economists polled by Reuters had forecast 1.0 million applications in the latest week.
The reopening of businesses in May helped to pull down claims from a record 6.867 million in March, when establishments were shuttered in an effort to slow the spread of the coronavirus. Claims fell below 1 million early this month for the first time since the pandemic started in the United States.
With a government-funded program offering businesses loans to help with wages lapsing and a weekly unemployment supplement expiring in July, the labor market momentum has slowed. Economists attributed a sharp rebound in hiring over the past months to the government’s financial support.
The claims report also showed the number of people receiving benefits after an initial week of aid dropped 223,000 to 14.535 million in the week ending Aug. 15. The so-called continuing claims data covered the week during which the government surveyed households for August’s unemployment rate.
Continuing claims declined between the July and August survey periods. Much of the decrease in continuing claims was likely because of people exhausting eligibility for benefits. At least 27 million people were receiving unemployment benefits under all programs in the week ended Aug. 8.
A survey from the Conference Board on Tuesday showed a deterioration this month in a labor market measure that corresponds closely with the unemployment rate.
U.S. stocks opened higher. The dollar dipped against a basket of currencies. U.S. Treasury prices were mixed.
In a separate report on Thursday, the Commerce Department said gross domestic product plunged at a 31.7% annualized rate last quarter, the deepest decline in output since the government started keeping records in 1947. That was revised from the 32.9% pace reported last month.
The economy slipped into recession in February.
After-tax profits without inventory valuation and capital consumption adjustment, which correspond to S&P 500 profits, dropped at a rate of 11.7%. Profits decreased at a pace of 13.1% in the first quarter.
When measured from the income side, the economy contracted at a 33.1% rate in the last quarter. Gross domestic income (GDI) declined at a rate of 2.5% in the January-March period. The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, decreased at a 32.4% rate last quarter. That compared to a 3.7% pace of decline in the first three months of the year.
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