The first-time applications for unemployment insurance have hardly changed in the past week despite other indicators of a weakening labor market at the end of 2020.
Weekly claims for the week ended Jan. 2 were 787,000, the Labor Department reported Thursday. That was less than the Dow Jones estimate of 815,000 and a slight decrease from the previous week’s revised upward of 790,000.
The report also showed a 126,000 decrease in ongoing receivables to 5.07 million. Those who received benefits from all programs also declined, falling 420,000 to 19.2 million.
Claims remain well above pre-pandemic levels as a continued surge in Covid infections has put economic restraints in states and communities across the country.
On Wednesday, ADP reported that private hiring fell for the first time since April, when businesses lost 123,000 in December. This balance showed that almost all layoffs occurred in large companies and in the hotel industry, as hotels, restaurants and bars were particularly hard hit by the resurgence of the pandemic in winter.
“A combination of Covid fear and government-mandated restrictions on service sector activity is pulling businesses together and expect no real relief until pressure on hospitals continues to ease. This is likely to be late February at the earliest,” he wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics.
The weekly number of claims is one day before the closely monitored payroll report outside of agriculture.
The Department of Labor is expected to report on Friday that the US economy created just 50,000 jobs by the end of turbulent 2020, while the unemployment rate is likely to rise to 6.8%, according to Dow Jones estimates.
Even with the likelihood of year-end attitudes slowing, the four-week moving average for claims continued to decline, falling to 818,750 last week. However, the labor market is still in dire straits, as the four-week average a year ago was 219,750.
At the state level, Illinois reported by far the largest drop in claims at 62,765, according to unadjusted data. Several states saw gains of more than 10,000, including Colorado, Georgia, Kansas, Virginia, and Texas.
Significant growth is expected in the fourth quarter despite the decline in hiring.
The Atlanta Federal Reserve’s GDPNow activity tracker points to an 8.9% increase in gross domestic product with rising consumption and increased investment.