US sees 1.54 million new jobless claims as coronavirus layoffs go on

Layoffs caused by the coronavirus pandemic reached 44.2 million in the United States even as businesses try to reopen, with analysts warning of continuing damage to the world’s largest economy.

Wall Street stocks plunged at the start of trading Thursday, reversing recent gains as traders became spooked by resurgent coronavirus cases in parts of the country and the new Labor Department data showing 1.54 million workers putting in new unemployment benefit claims last week.

Such massive layoffs have become routine since shutdowns to stop the coronavirus from spreading began in mid-March and have been declining since reaching their peak later that month.

But the weekly total is still well above any figure seen during the global financial crisis in 2008.

Rubeela Farooqi of High-Frequency Economics said the data shows the US economy is clearly not back to normal.

“States and businesses have reopened, but activity remains restricted and subdued, which will likely result in ongoing layoffs over coming weeks,” she said in an analysis.

Covid-19 remains a stubborn threat in the United States, which continues to record around 20,000 new cases every day with few signs of a reduction. States like Texas and North Carolina are seeing more patients hospitalized with the virus than a month ago.

Speaking on CNBC, Treasury Secretary Steven Mnuchin indicated the government wouldn’t waver from its push to get businesses operating, saying “We can’t shut down the economy again.”

That didn’t seem to convince Wall Street traders, who pulled back from the gains made in recent days in which the tech-rich Nasdaq hit a record high and the broad-based S&P 500 erased its losses for the year.

But about 90 minutes after the opening bell, the Nasdaq was 2.5 per cent in the red and the S&P 3.3 per cent, while the benchmark Dow Jones Industrial Average retreated 3.9 per cent.

The Labor Department data did confirm that the waves of layoffs were ebbing, with 355,000 fewer initial claims filed in the week ended June 6 than in the week prior.

About 20.9 million people received unemployment payments in the week ended May 30, down from 21.3 million the week before -- indicating that people were either returning to work or had their claims denied, and bringing the insured unemployment rate down 0.2 points to 14.4 per cent.

Also adding to the initial jobless claims filed last week were 705,676 people who applied for benefits under a special program for contractors and gig economy workers.

All told, the report was in line with May’s unemployment figures, which declined to 13.3 per cent from 14.7 per cent in April as the US economy added 2.5 million jobs, though the Labor Department acknowledged a classification error that would likely put both months’ figure three points higher.

“It appears that there are two stories playing out simultaneously and at odds with one another,” tweeted Ernie Tedeschi, head of fiscal analysis at investment banking firm Evercore ISI.

“The May jobs report, and the decline in net continuing claims, provides evidence that some firms are indeed hiring. But other firms are clearly still laying off, perhaps closing down.”

A separate Labor Department report released Thursday showed a better-than-expected rise in producer prices by 0.4 per cent in May, reversing a 1.3 per cent decline in April.

A biggest-ever jump of 1.6 per cent in prices for final demand goods fueled the increase with meat prices rising by 40.4 per cent, though services posted an overall 0.2 per cent decline.