Spotlight: U.S. jobless claims remain elevated, full recovery years away

Source: Xinhua| 2020-07-18 00:30:10|Editor: huaxia

WASHINGTON, July 17 (Xinhua) -- The United States has seen 17 straight weeks of initial jobless claims as COVID-19 ravages the economy, and it could take years for the labor market to regain the pre-pandemic levels, analysts said.

In the week ending July 11, the number of Americans filing for new unemployment benefits decreased by 10,000 from the prior week to 1.3 million, the Labor Department reported Thursday.

It marked the 17th straight week that U.S. initial jobless claims exceeded 1 million, which was nearly double the pre-pandemic record set in 1982.

With the latest numbers, a staggering 51.3 million initial jobless claims have been filed since the pandemic forced widespread U.S. business closures in mid-March, indicating the mounting economic fallout of COVID-19.

The advance unadjusted insured unemployment rate was 11.9 percent during the week ending July 4, an increase of 0.6 percentage point from the prior week, according to the Labor Department.

The new report also showed big increases of applications for unemployment benefits in the states of California, Georgia and Florida last week, which were experiencing a surge in COVID-19 cases.

At least 22 U.S. states have either paused or partially reversed their efforts to reopen their economies so as to limit the spread of COVID-19, according to local media.

"Initial claims for unemployment insurance benefits are very likely to rise in the next few weeks as states, counties and cities strive to get their outbreaks under control. How quickly they start to decline again will depend on the trajectory of the virus," Dante DeAntonio, a senior economist with Moody's Analytics, wrote Thursday in a note.

"At this point, public policies on social distancing are not the only thing weighing on demand. Fear of contracting the virus and the uncertain economic situation are keeping consumers at home and keeping a lid on household spending," DeAntonio wrote.

Confirmed COVID-19 cases in the United States topped 3.59 million as of noon Friday with deaths over 138,000, according to a tally by Johns Hopkins University.

While U.S. employment rebounded strongly in May and June as states gradually eased the lockdowns and reopened, the path forward for the recovery in the U.S. economy and labor market is going to be more of a slog than a snap back, analysts said.

"Certainly, we've seen some temporarily laid off workers return to their jobs, but permanent unemployment is continuing to rise at a rapid pace," Michael Hicks, director of the Center for Business and Economic Research at Ball State University in Indiana, told Xinhua via email.

"We are not in a V-shaped recovery, and will not be in a V-shaped recovery. That possibility is now behind us, and we face at best a very agonizingly slow return to normalcy," Hicks said, adding the U.S. recovery could take two to three years after the disease has run its course under the best case scenario.

"Even if we have a vaccine next month, which is widely distributed by year's end, it will still take two or more years to absorb the permanent job losses experienced by the U.S. during the past 120 days. I am not optimistic it will be that quick, and I think we will face double digit joblessness for a year or longer," he said.

Gary Hufbauer, a former U.S. Treasury official and nonresident senior fellow at the Peterson Institute for International Economics, said he expected the U.S. unemployment to remain above 10 percent until a vaccine is widely administered.

"And I don't expect that to happen before June 2021. According to my crystal ball, the U.S. will not regain the level of employment and output reached in 2019 before the end of 2021, or perhaps not until the first half of 2022," Hufbauer told Xinhua via email.

The CFO Survey released by Duke University's Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta last week also showed that a typical U.S. firm does not expect to regain their pre-COVID employment levels until sometime after the end of 2021.

"The recent resurgence in COVID cases is a sober reminder that the pandemic remains the key driver of the economy's course. A thick fog of uncertainty still surrounds us, and downside risks predominate," Federal Reserve Governor Lael Brainard said Tuesday said at a virtual event hosted by the National Association for Business Economics.

"The recovery is likely to face headwinds even if the downside risks do not materialize, and a second wave would magnify that challenge," Brainard said, noting the pace of job recovery may slow going forward "if a large portion of the easiest gains from the lifting of mandated closures and easing of capacity constraints has already occurred."

"Some high-frequency indicators tracked by Federal Reserve Board staff (including mobility data and employment in small businesses) suggest that the strong pace of improvement in May and the first half of June may not be sustained," she said.

The U.S. economy officially entered a recession in February, ending a decade-long recovery from the 2008 global financial crisis, according to the National Bureau of Economic Research.

Official statistics showed that the U.S. real gross domestic product (GDP) contracted at an annual rate of 5 percent in the first quarter this year, however, the figure still does not fully capture COVID-19's economic damage and many analysts expect the U.S. GDP to sharply shrink at an annual rate of 30 percent to 40 percent in the second quarter. Enditem