U.S. labor market struggling, but light at the end of tunnel

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The number of Americans filing new applications for unemployment benefits fell slightly last week as the labor market continued to tread water, but a drop in new COVID-19 cases has raised cautious optimism that momentum could pick up by the spring.

FILE PHOTO: Hundreds of people line up outside the Kentucky Career Center, over two hours prior to its opening, to find assistance with their unemployment claims in Frankfort, Kentucky, U.S. June 18, 2020. REUTERS/Bryan Woolston/File Photo

Initial claims for state unemployment benefits slipped 19,000 to a seasonally adjusted 793,000 for the week ended Feb. 6. Data for the prior week was revised to show 33,000 more claims received than previously reported. Economists polled by Reuters had forecast 757,000 applications for the latest week.

The labor market recovery has stalled in recent months as the country battled a resurgence in coronavirus infections, which ravaged restaurants and other consumer-facing businesses. The government reported last Friday that the economy created only 49,000 jobs in January after losing 227,000 in December.

Should the trend continue and the distribution of vaccines broaden out, that, together with additional stimulus, could allow more businesses to reopen. There are signs that businesses are testing the waters. Temporary help jobs, a segment normally considered a harbinger of future hiring, jumped in January.

At least 4.778 million people were on extended benefits during the week ended Jan. 23, up 1.2 million from the prior period. These benefits, which are funded by the government, will expire in mid-March if Congress does not pass the Biden administration’s relief package.

 

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