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Jobless claims climbing in sign of ongoing distress in labor market

Winners and losers in COVID economy
Winners and losers in COVID economy 09:03

The number of Americans filing for unemployment aid remains stuck at a high level.

Some 870,000 people filed for state unemployment benefits in the week ending September 19, the Labor Department said Thursday. (The figures are adjusted for seasonal variation.) That amounts to an increase of 4,000 from the week before, and is four times the typical weekly level before the coronavirus pandemic struck in March. Another 630,000 workers applied for Pandemic Unemployment Assistance, a program for the self-employed and gig workers.

"Layoff announcements are ongoing, indicative of continuing strains in the labor market," Rubeela Farooqi of High Frequency Economics told investors in a research note. "Even as nearly half of payroll losses have been recovered, it is likely further progress will be more modest given slowing momentum in economic activity recently."

Most economists say that the job market will not fully recover without more aid from the federal government. Job growth has slowed in recent months, and employers in most industries appear reluctant to hire new workers in the face of deep uncertainty about the course of the virus.

"[T]he clear picture that has emerged in the recent employment figures is a continued slowdown in the pace of rehiring across the private sector," Michael Pearce, senior U.S. economist at Capital Economics, said in a research note.

A total of 26 million people were receiving some sort of unemployment aid in the first week of September, a drop of 3.7 million from the last week of August. That figure has declined steadily over the past several months, reflecting that some unemployed people are being re-hired and that others are exhausting their jobless aid, which is time-limited in most states. 

Since the end of July, an extra $600 weekly benefit that some unemployed workers received has run out, and Congress has failed to agree on additional financial assistance. Some states have applied for a temporary $300 weekly boost President Donald Trump created via executive order, but that benefit has expired in at least seven states.

Aid delays

The new unemployment data coincides with evidence that some newly laid-off Americans are facing delays in receiving unemployment benefits, with state agencies intensifying efforts to combat fraud, the Associated Press reports.

California has said it will stop processing new applications for two weeks as it seeks to reduce backlogs and prevent fraudulent claims. Pennsylvania has found that up to 10,000 inmates are improperly receiving aid.

The growing concerns about fraudulent applications for unemployment benefits have focused mainly on Pandemic Unemployment Assistance. The new federal program, created as part of the Coronavirus Aid, Relief and Economic Security Act in March, made self-employed people, gig workers and contractors eligible for jobless aid for the first time.

Though roughly 14 million people are classified as receiving aid under that program, economists increasingly regard that figure as unreliable and likely inflated by both fraudulent applications and inaccurate counts. The number of people receiving benefits under the PUA program is probably overstated by several million, economists say.

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