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Unemployment claims surge to nearly 1 million in "flashing red warning"

965,000 Americans file for unemployment
America's job crisis escalates as 965,000 Americans file unemployment claims 05:55

The number of Americans filing for jobless aid surged to almost 1 million in the first week of 2021, a sign the worsening coronavirus pandemic is causing businesses to lay off workers. 

Roughly 965,000 people applied for unemployment in the week ending January 9, the Labor Department said Thursday. That's 181,000 more than the previous week's claims, which were revised down to 784,000, and the highest claims figure since August. It's also the biggest weekly increase since the pandemic began, according to Jennifer Lee, senior economist at BMO.

The surge in unemployment claims signals the rising headwinds facing businesses as COVID-19 infections climb and the death toll reaches new records, with 4,300 deaths on Tuesday. The latest jobless claims are among the "flashing red warning signs" that the recovery is being battered by the worsening pandemic, said Andrew Stettner, senior fellow at the Century Foundation and an expert on unemployment.

While analysts believe the job market will recover quickly once vaccines are widely distributed, that point isn't likely to be reached until later this summer or fall.

"The U.S. just won't be able to ramp up the rehiring of the 17.47 million workers now relying on benefits until we greatly advance the fight against COVID," Stettner said in an emailed statement. 

Another 284,470 applied for Pandemic Unemployment Assistance, a special federal program for self-employed, freelance and gig workers, bringing the total number of people seeking federal unemployment help in the past week to nearly 1.25 million.

Employers debate whether to make COVID-19 vaccination mandatory for employees 04:43

Now that a $300 boost in weekly benefits is available to jobless Americans, applications for unemployment had been expected to rise, although economists had forecast traditional unemployment claims would be around 800,000. 

The latest data comes after employers cut 140,000 jobs in December, with leisure and hospitality companies the hardest hit, with the sector losing some 500,000 jobs. Increases in businesses-services hiring last month whittled December's net losses to 140,000.  

The jump in the latest weekly unemployment claims could be due to both the recently passed pandemic relief bill, with more jobless workers filing for aid given the addition of $300 in weekly unemployment benefits, and more job cuts in such service-sector workplaces as restaurants and hospitality businesses, Lee of BMO said in a Thursday research note. 

Economists said the renewed spread of the coronavirus, which has killed nearly 385,000 people in the U.S., is taking a toll on hiring as states and cities reimpose restrictions on employers.

"The impact of new restrictions that are resulting in business closures and layoffs is appearing in the data now," Rubeela Farooqi of High Frequency Economic said in a research note.

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