The number of laid-off workers who applied for unemployment benefits declined slightly to 1.48 million last week, the 12th straight drop and a sign that layoffs are slowing but are still at a painfully high level.
The steady decline in claims suggests that the job market has begun to slowly heal from the pandemic, which shuttered businesses and sent the unemployment rate up to 14.7 per cent in April, its highest level since the Great Depression. The number of people who are receiving jobless aid also fell last week, evidence that employers are rehiring some of the workers who had been laid off since mid-March.
Yet the latest figure also coincides with a sudden resurgence of COVID-19 cases in the United States, especially in the South and West, that’s threatening to derail a nascent economic rebound.
On Wednesday, the nation set a record high of new coronavirus cases. Many states are establishing their own records for daily infections, including Arizona, California, Mississippi, Nevada, Texas and Oklahoma. Cases of coronavirus have also jumped in Florida and Georgia.
Should those trends continue, states may reimpose some limits on businesses that would likely trigger job cuts. Whether by choice or by government order, fewer consumers would shop, travel, eat out and visit bars or gyms. All those scenarios would result in renewed layoffs and hinder the economy.
Nervous investors sent stock prices plummeting Wednesday over escalating fears that the economy will suffer further damage from the disease. The health crisis continues to cast a dark shadow over the economic landscape, said Bob Schwartz, a senior economist at Oxford Economics, a forecasting firm.
Before this week’s heightened worries about the pandemic, many economists had been relatively optimistic. In May, the unemployment rate unexpectedly declined, though to a still-high 13.3 per cent. Consumers began spending again, sending retail sales jumping by a record amount. And sales of new homes rose as record-low mortgage rates fueled buyer interest.
In May, employers added 2.5 million jobs, a surprise gain. Still, that hiring represented just one-ninth of all the jobs that have been lost since the pandemic struck. And about 30 million Americans remain unemployed.
The economy shrank at a 5 per cent annual rate in the first three months of the year, the government estimated Thursday.
Yet economists envision a much sharper plunge in the April-June quarter — a rate of up to 30 per cent, which would be the worst since record-keeping began in 1948. Analysts expect the economy to rebound in the second half of this year before potentially regaining its pre-pandemic level in late 2021 at the earliest.
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