U.S. labor market recovery faltering; layoffs hit record in 2020

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New filings for unemployment benefits remain extremely high with the labor market recovery appearing to stall as the health crisis threatens to overwhelm the U.S.

Layoffs announced by U.S. companies surged 18.9% in December, other data on Thursday showed. Though services industry activity accelerated last month, employment fell. The reports followed on the heels of news on Wednesday that private companies shed workers in December, heightening the risk that the economy lost jobs last month for the first time since April.

Initial claims for state unemployment benefits dipped 3,000 to a seasonally adjusted 787,000 for the week ended Jan. 2, compared to 790,000 in the prior week, the Labor Department said. Economists polled by Reuters had forecast 800,000 applications in the latest week. FILE PHOTO: People line up outside Kentucky Career Center prior to its opening to find assistance with their unemployment claims in Frankfort, Kentucky, U.S. June 18, 2020. REUTERS/Bryan Woolston

Separately, the Institute for Supply Management said its index of services industry employment dropped to a reading of 48.2 last month from 51.5 in November. The ISM said comments from companies included “less staff needed in restaurants due to restrictions” and “we had to reduce our workforce even further.”

Jobless claims remain above their 665,000 peak during the 2007-09 Great Recession, though they have dropped from a record 6.867 million in March. The government in late December approved nearly $900 billion in additional fiscal stimulus, including the renewal of a $300 unemployment supplement until March 14.

 

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