Experts Warn Of Economic Stagnation In Light Of Initial Unemployment Claims

Initial unemployment claims rose by 53,000 last week to 898,000, breaking a three-week decline, raising the spector of an economic slowdown and highlighting the uneveness of the recovery.

The Labor Department Thursday revised the previous week's numbers up by 5,000 while the four-week moving average rose by 8,000.

"There is risk of stagnation in the coming months as layoffs mount, and more businesses struggle or fail. Federal Reserve officials don’t expect to see so-called full employment again until 2023," Mark Hamrick, senior economic analyst at Bankrate.com, told International Business Times in an email.

"Beneath the surface, a K-shaped recovery has very much come into view, as the striking separation of the haves and have-nots has dramatically unfolded. The fissure largely reflects the ability of some service sector employees to work from home while others who cannot do that suffer either a loss of employment or income or both."

The report came with an advisory, noting California had paused its reporting for two weeks to clear a backlog and "implement fraud prevention technology," skewing results. In the interim, the statistics will include the number of claims filed in California for the week before the pause began.

With the next round of coronavirus economic stimulus stalled in Washington, Andrew Stettner, senior fellow at the Century Foundation and an expert on unemployment insurance, noted by the end of the year, millions of Americans "will have run out of jobless aid and have no access to federal extended benefits."

"The overall data indicate a severe situation with little prospect of additional action by Congress this year. It will have devastating consequences," Stettner warned in an email to IBT.

Extended benefits expire Dec. 31.

Grant Thornton chief economist Diane Swonk likened last week's claims to "a punch in the gut."

But, she said, she does not expect them to make a difference in the stimulus talks.

The Bureau of Labor Statistics said nearly 25.3 million Americans were collecting benefits for the week that ended Sept. 26, compared to 1.4 million in the comparable 2019 week. The highest unemploment rates were reported in Hawaii, California, Nevada, Puerto Rico and Louisiana.

BLS pegged the unadjusted insured unemployment rate at 6.6% for the week that ended Oct. 3. The largest increases in claims were reported by Florida, Illinois, Massachusetts, North Carolina and Maryland while the largest decreases were reported by New Jersey, Kansas, Pennsylvania, Louisiana and Washington.