Jobless claim data underscores employment crisis awaiting Biden

WASHINGTON — Government data released the day after Joe Biden entered the White House made clear the scale of the employment crisis facing the new US president as the country struggles to make it through the Covid-19 pandemic. 

The United States saw 900,000 new filings for unemployment benefits last week, the Labour Department said Thursday, a massive number that remains well above the single worst week of the 2008-2010 global financial crisis, during which Biden served as vice president under Barack Obama.

Economists had been expecting a sharper drop in seasonally adjusted claims in the week ended January 16, but instead they fell just 26,000 from the prior week, underscoring the toll taken by the renewed onslaught of Covid-19 in the United States.

The government also reported 423,734 new filings made under the Pandemic Unemployment Assistance programme for self-employed people not normally eligible for benefits.

That was nearly double the week prior after that programme lapsed briefly amid a standoff in Washington over extending it and other aid.

All told, nearly 16 million people were receiving some form of aid from the government as of January 2 -- a figure that's expected to rise.

"Layoffs are ongoing at an elevated pace, reflecting the impact of containment measures," Rubeela Farooqi of High Frequency Economics said in an analysis.

"Conditions are unlikely to improve until infections can be curbed, and the economy can reopen more completely."

Turning it around 

New jobless filings skyrocketed after states and cities restricted business across the country when Covid-19 broke out in March, and though they've come down from the millions initially reported each week as businesses shed employees en masse, they remain at very high levels.

The unemployment rate has seen a similar trajectory, shooting up to 14.7 per cent in April but declining in subsequent months to its current 6.7 per cent.

Biden, who took office on Wednesday, has proposed a $1.9 trillion spending measure aimed both at revitalising the economy and improving the rollout of Covid-19 vaccines.

However, Lydia Boussour of Oxford Economics warned the country is in for rough times to come.

"Fiscal stimulus prospects, along with broader vaccine diffusion, are pointing to a brightening labour market outlook but with the pandemic still raging, claims are poised to remain elevated in the near-term," she said.

With his Democrats only narrowly controlling both houses of Congress, it's unclear what degree of support Biden's package will get from Republicans.

Michael Feroli of JP Morgan predicted Congress could pare the president's plan down to the $900 billion range, matching a separate measure approved last month. 

Even the smaller amount would boost GDP growth this year to 5.3 per cent and in 2022 to 2.6 per cent, he said, a "remarkable expected turnaround" aided also by negligible inflation and the Federal Reserve's maintenance of low borrowing rates.

Sectors of the economy have nonetheless prospered during the pandemic, with the Commerce Department reporting on Thursday homebuilding projects jumped 5.8 per cent in December from the month prior.

That was 12 per cent higher than December 2019, despite the toll of Covid-19.