The number of new unemployment claims filed last week jumped by 181,000 the week before to 965,000, the largest increase since the beginning of the pandemic.
It was the largest number of new unemployment claims since August.
An additional 284,000 claims were filed for the Pandemic Unemployment Assistance, the insurance for gig and self-employed workers.
The weekly report is President Trump’s last before President-elect Joe Biden is sworn in on Jan. 20. Biden will inherit a labor market badly weakened by the coronavirus pandemic and an economic recovery that appears to have stalled: 140,000 people lost their jobs in December, the first decline in months, with the U.S. still down millions of jobs since February.
The dire numbers will serve as a backdrop for Biden as he formally unveils an ambitious stimulus package proposal on Thursday, which could top $1 trillion, and is expected include an expansion of the child tax credit, a $2,000 stimulus payment, and other assistance for the economy.
Democrats were already using the weak labor to argue about the necessity of more aid.
Economists say that the economy’s struggles could be explained, in part, by the delay Congress allowed between the summer, when many fiscal aid programs expired and December, when lawmakers finally agreed on a new package after months of stalemate.
The number of new jobless claims has come down since the earliest days of the pandemic, but remains at a extremely high level week in and week out.
The total number of continuing people in any of the unemployment programs at the end of the year was 18.4 million, although officials have cautioned that the number is inflated by accounting issues and duplicate claims.
The increase in claims is not entirely unexpected. As the aid package passed by Congress in December kicks in, including a $300 a week unemployment supplement, some economists expected that to result in more workers filing claims.
The economy lost 140,000 jobs in December, the first reported losses since April, as the unemployment rate remained steady at 6.7 percent.
Economists expected a small jobs gain of nearly 50,000. The drop is the latest sign of a weakening economy amid the ongoing COVID-19 crisis. All in all, the economy remains about 10 million jobs below its pre-pandemic levels.
“There’s not much comfort to be taken from the stable unemployment rate, given that millions of Americans have left the labor force with nearly 11 million listed as officially out of work,” said Mark Hamrick, senior economic analyst at Bankrate.com.
“Between the human and economic tolls taken by the pandemic, these are some of the darkest hours of this soon-to-be yearlong tragedy.”
The biggest losses were concentrated in leisure and hospitality, a sector particularly vulnerable to the effects of the pandemic, which lost an astonishing 498,000 jobs.
State and local government payrolls shed 51,000 jobs. Congress deferred passing state and local aid in its latest COVID-19 relief bill.
But the overall loss would have been worse had it not been for gains in professional and business services, which added 161,000 jobs; retail trade, which added 120,500 jobs; and construction, which added 51,000.
Some demographic groups have been hit harder by the economic downturn.
The unemployment rate for Hispanics rose to 9.3 percent in December, while Black unemployment remained elevated at 9.9 percent. The rate for whites was 6 percent, and for Asians it was 5.9 percent.
Over a third of jobless people have been unemployed for over 27 weeks.
Twenty states and dozens of localities increased their minimum wage on Friday, giving a financial boost to many frontline workers during the pandemic.
New Mexico will see the largest jump, adding $1.50 to its hourly minimum and bringing it up to $10.50. Arkansas, California, Illinois and New Jersey will each increase their minimum wages by $1.
Alaska, Maine and South Dakota will increase wages by just 15 cents an hour, while the rate in Minnesota will rise by half that, at 8 cents, to $10.08 an hour.
Additional increases are scheduled for elsewhere this year, with most changes taking effect on July 1.
Low-income earners, like much of the country’s workforce, have seen their wages remain relatively stagnant for decades when inflation is taken into account. Proponents say the new raises will help reduce poverty and offer much-needed pay hikes to some of the most vulnerable workers.
“Minimum wage increases income levels, reduces poverty, so I think it’s pretty clear that it improves conditions in the lower end of the wage distribution,” said Daniel Kuehn a research associate at The Urban Institute.
Localities are also boosting their minimum pay. Flagstaff, Ariz., will see wages rise from $13 an hour to $15, as will Burlingame, Calif.
In some municipalities, the increases are dependent on business size. Hayward, Calif., for example, will follow the same wage hike as Burlingame, but employers who 25 or fewer workers will need to raise wages from $12 an hour to $14.
Varying minimum wages across localities, Kuehn said, lets governments take into account different cost-of-living conditions.
“I think the ideal policy would include a lot of local variation, but that doesn’t mean a federal floor isn’t helpful,” he said.
The federal minimum wage has been stuck at $7.25 since 2009. In recent years, the goal of a $15 minimum wage has become a standard progressive policy.
House Democrats in July 2019 passed a bill that would gradually increase the federal minimum wage to $15 gradually through 2025, but the measure died in the GOP-controlled Senate.
“While families work hard to make ends meet, their cost of living has surged to unsustainable highs, inflation has eaten nearly 20 percent of their wages and the GOP’s special interested agenda has left them behind,” Speaker Nancy Pelosi (D-Calif.) said at the time.
“No one can live with dignity on a $7.25 an hour wage,” she added.
The issue is back in the political spotlight again with Tuesday’s runoff elections in Georgia that will determine which party controls the Senate for the next two years.
The Democratic challengers are arguing that the federal minimum wage will only increase if they win both races.
“If the federal minimum wage kept up with the cost of living, it would be even higher than $15,” Democratic candidate Jon Ossoff said last week. “The basic premise is that anybody in this country working a single full-time job should be bringing home enough money to sustain themselves and then some.”
But critics argue that minimum wage increases could slow job growth by raising labor costs for employers, an issue of particular concern during the fragile recovery from the coronavirus recession.
“A dramatic increase in the minimum wage even in good economic times has been shown to be harmful,” said Michael Saltsman, the managing director for the Employment Policy Institute, a think tank tied to the restaurant and hospitality industry.
“In the current climate, for many employers it could be the final nail in the coffin,” he added.
Saltsman argued that increasing anti-poverty programs such as the Earned Income Tax Credit are better policies than wage increases. The tax credit essentially operates as a government subsidy for low-wage work, shifting the onus of paying the extra wages from businesses to taxpayers.
Kuehn said there is little evidence to suggest that small and gradual increases of the minimum wage have significant effects on employment.
“The minimum wage increase levels we see get passed are not large enough to have significant employment effects,” he said.
But he concedes that it’s harder to predict the effects of a quick nationwide boost toward $15.
“I think it’s important to note that since we’ve never had a federal increase of that magnitude, there’s a lot we don’t know,” he said. “With something of that size, you would worry about low-wage places like Mississippi or Alabama.”
A report from the nonpartisan Congressional Budget Office in 2019 projected that a gradual increase to $15 through 2025 would mean “1.3 million workers who would otherwise be employed would be jobless in an average week in 2025.”
But it also specified a range of possible outcomes, including no job losses on the low end and as many as 3.7 million jobs lost on the high end.
The report found that 27 million people would see higher income, and that the poorest families would have wages rise as much as 5.2 percent.
Researchers such as Kuehn are adamant that businesses can handle increasing wages at moderate levels, even in the midst of a global health crisis.
“It certainly doesn’t make businesses’ lives easier, but businesses aren’t struggling right now because of wage costs,” he said.
“They’re hurting because of the pandemic.”
Amid the surge in the ranks of the unemployed during the pandemic, another crucial problem in the labor market has gone mostly overlooked: Workers are calling out sick in record numbers this year.
Whether it’s because they have Covid-19 themselves, are worried about getting it or are taking care of someone who already has it, the number of workers who’ve missed days on the job has doubled in the pandemic.
What’s more, unlike the jobless rate, which has steadily declined from its April peak, the rate of abseenteism — as it is called by economists — has remained stubbornly high. Almost 1.8 million workers were absent in November because of illness, nearly matching the record 2 million set back in April, according to Labor Department data.
These lost days of work are sapping an economic recovery that’s been progressing in fits and starts for much of the past several months. While some indicators have improved markedly, others such as retail sales and consumer spending and incomes have weakened as the pandemic rages on and local governments impose fresh restrictions on businesses and travel.
Michael Gapen, chief U.S. economist at Barclays Plc, said that the vaccine could start driving down absenteeism by the second quarter. Until then, he said, the missed work is leading to supply chain disruptions.
Absenteeism “could lead to shortages, it could lead to higher prices and more restrained output,” Gapen said.
With about 1.5 million new cases per week and deaths at a record pace, employee absenteeism may remain elevated for some time, especially in early 2021 before vaccines are widely distributed and with the rollout in the U.S. moving slower than government officials expected.
While the Labor Department data tracks people currently in the labor force who are out sick, a separate survey by the Census Bureau captures an even wider view of the challenge. Its latest Household Pulse Survey — based on responses in late November and early December — estimates that more than 11 million people weren’t working because of the virus. The figures also include those who refrained from working because they were worried about getting or spreading the virus, and those caring for someone with symptoms.
The effects of missing workers are especially concentrated in manufacturing. Absenteeism, combined with short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers, limit the sector’s growth potential, according to Timothy Fiore, chair of the Institute for Supply Management’s Manufacturing Business Survey Committee.
The group’s gauge of factory activity grew at a slower pace in November, with the employment component falling back to a level that indicates contraction.
“It’s not a lack of work,” Fiore said on a recent call with reporters, noting absenteeism especially for low- to medium-skill roles. “It’s a lack of people.”
In addition to temporarily absent workers, the manufacturing sector has 525,000 job openings, the most in Labor records back to 2000.
Auto plants are feeling the effects. General Motors Co. put white-collar employees on the production floor in August to cope with high absenteeism amid strong demand. Volkswagen AG Chief Financial Officer Frank Witter has said high levels of missing staff left the automaker “at times struggling to get all the cars built for customer orders.”
U.S. businesses have reported that surging cases precipitated plant closings and infection fears, adding to labor challenges including absenteeism and attrition, according to the Federal Reserve’s latest Beige Book summary of economic conditions. Manufacturers in the Chicago region have used overtime to make up for staff shortages, the Dec. 2 report said.
For office workers, 90% of professionals said before the pandemic they’d sometimes go to work sick, according to a 2019 study by staffing firm Accountemps. Covid changed the conversation, and more employees are staying home to protect themselves and others.
The Families First Coronavirus Response Act earlier this year made the decision to stay home easier for some Americans by allowing two weeks of paid sick leave for certain employees. The law also allows leave for those unable to work because they must care for a child.
The latest stimulus bill, signed by President Donald Trump on Dec. 27, includes an extension of the act through March 31, but makes paid leave voluntary for employers rather than mandatory as it was in the first iteration. That may continue the trend of workers staying home depending on how many employers choose to grant the leave.
The act, however, excludes essential workers, which means those employed at facilities such as meatpacking plants can’t take advantage of the policy. That in turn can lead to workplace outbreaks and further disrupt production.
With fewer employees at work, slaughter rates at U.S. meat plants fell in the third quarter. Tyson Foods Inc. Chief Executive Officer Dean Banks said on a recent earnings call that absenteeism has “increased the cost and complexity of our operations” and that the company expects that to continue in 2021.
An estimated 803,000 people applied for unemployment aid for the first time last week, the Labor Department said Wednesday, showing the economy’s persistent weakness as new drama swirls over Washington’s response to the crisis. The figure was a slight decrease from the previous week but still much higher than normal.
The new Labor Department data show how weak the economy is, particularly the labor market. The surge in new coronavirus cases and deaths in the past few months has cooled the partial economic recovery from the summer.
Retail sales have weakened, and hiring has slowed markedly. The travel and tourism industries have not recovered much of the business lost since March, and thousands of companies — particularly restaurants and bars — have closed. U.S. household spending slipped in November, marking the first drop since April.
After months of stop-and-start negotiations, the bipartisan stimulus package finally offered some hope for households and businesses fighting to make it through the winter.
If Trump does not sign the bill, up to 14 million Americans would lose unemployment aid after Christmas. An eviction moratorium will expire at the end of the year, and $25 billion in emergency rental assistance will not get out the door. Billions of dollars for nutrition assistance, aid for small businesses, child care, transportation services and more will be in jeopardy, and the government will shut down on Dec. 29.
Trump did not play much of a role in the economic relief talks that resulted in Congress passing the $900 billion stimulus package. In the video Trump posted Tuesday night, his main complaint was that he wanted the $600 stimulus checks in the package to be increased to $2,000. This would add $370 billion to the measure.
Democrats quickly rallied around Trump’s demand, and House Speaker Nancy Pelosi (D-Calif.) plans to try to hold a vote on it as soon as Thursday. But it could be virtually impossible to pass such a measure through Congress with unanimous support, leaving the entire bill’s future uncertain.
The stimulus package would extend unemployment benefits of up to $300 per week, beginning as soon as Dec. 27 and run at least through mid-March. The measure also would extend Pandemic Unemployment Assistance — which targets part-time and gig workers who did not qualify for state unemployment insurance benefits — for 11 weeks.
Wednesday’s data showed nearly 400,000 new claims for the Pandemic Unemployment Assistance program.