Jobless claims skyrocketed last week. Do we have to fear an economic setback?
- New jobless claims for the week ended Jan. 15 totaled 286,000.
- Economists only expected 225,000 new applications.
In December, the national unemployment rate hit its lowest level since the pandemic began. And that’s despite a massive spike in COVID-19 cases that began mid-month.
But the Omicron surge has not abated. If anything, cases exploded even more in the wake of holiday meetings and New Year’s plans. And that could explain why last week’s jobless claims were the highest in months.
For the week ended January 15, new jobless claims totaled 286,000. That’s far more than the 225,000 new claims economists were expecting. It is also the highest number of weekly claims recorded since October.
For context, for the week ended January 8th, new jobless claims totaled 231,000. So 286,000 is clearly a big jump from there. And it wasn’t just newly filed claims that increased, but pending claims as well. That number increased by 84,000 to 1.64 million.
Is omicron to blame?
Many businesses are still desperate for employees, and industries like retail and hospitality still suffer from their share of labor shortages. Therefore, it is fair to assume that the Omicron outbreak contributed to this recent surge in jobless claims. With case numbers rising and more workers forced to isolate due to COVID-19 exposure, that alone could explain why jobless claims are rising.
Although workers who have contracted COVID-19 are generally not eligible for unemployment benefits, those forced into quarantine due to exposure may be eligible for assistance. That’s because workers in that boat are technically able-bodied and available – a criterion that must generally be met to receive these benefits (while workers who are ill are not considered available for work because of their illness ).
Therefore, the increase in new jobless claims over the past week could only be temporary and we could see a much lower number in the week ending January 22nd. Or we may see a few weeks of higher unemployment numbers as the current wave of COVID-19 sweeps through the country.
Do Higher Jobless Claims Mean More Stimulus Support?
The latest round of stimulus checks for Americans’ bank accounts was approved in March 2021. Back then, unemployment was much higher and there were fewer vacancies. COVID-19 vaccines were also not widely available, making it difficult for people to get back into the labor market. And many schools still operated partially or fully in virtual mode, making it harder for parents to accept full-time work.
But despite this sudden surge in new jobless claims, Americans are unlikely to see a fourth round of stimulus checks any time soon. While a rise in claims is not a good thing, even if this upward trend continues for a few more weeks, the economy is still in far better shape than it was in March 2021, when it was easier to make the case for a stimulus round.
Health experts have been optimistic that the recent COVID-19 wave will be relatively short-lived. If they prove correct, we could see a temporary spike in jobless claims before those numbers drop back to pandemic-era lows.
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