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Soaring Covid-19 infections likely eroded US employment recovery

Chris Stein
·3-min read
Weekly filings for new unemployment benefits have remained at high levels ever since the Covid-19 pandemic hit the US in March

Hiring in the United States likely stalled at the end of 2020, economists say, as coronavirus infections soared and Washington lawmakers squabbled over a massive spending bill that was approved only at the last minute.

The Labor Department on Friday will release the December jobs report, the final report for a year that saw the US economy unraveled by the Covid-19 pandemic, which continues to rage even as vaccines are being rolled out.

Business closures to stop the virus from spreading sent the unemployment rate skyrocketing in April from its record-low level, and though it has since decreased, the forecast among analysts is for little improvement from the 6.7 percent jobless rate reported in November.

"I think things have slowed down," said William Spriggs, chief economist of the AFL-CIO trade union federation.

"We'll continue to see what we saw in November, which is the bounceback is really grinding to a halt," he told AFP.

The report follows Labor Department data Thursday showing new applications for jobless benefits remained at a high level in the final week of the year.

"The underlying story here is clear. A combination of Covid fear and state-mandated restrictions on activity in the services sector is squeezing businesses, and no real relief is likely until a sustained decline in pressure on hospitals emerges," said Ian Shepherdson of Pantheon Macroeconomics.

- Worse than it looks -

The US was gripped by twin crises in 2020: the pandemic and its economic fallout.

The seemingly unstoppable Covid-19 outbreak has infected more than 21.3 million people and killed nearly 362,000 as of Thursday, according to Johns Hopkins University.

Efforts to stop the virus by ordering many businesses to close or restrict activities caused massive layoffs beginning in March that moderated over the summer as those regulations were relaxed.

But many states tightened rules again as Covid-19 cases began climbing in the winter, slowing the recovery in the labor market.

That has kept weekly new jobless claims above the single worst week of the 2008-2010 global financial crisis, with a seasonally adjusted 787,000 filings in the week ended January 2, 2021, the Labor Department said.

Another 161,460 people, without seasonal adjustment, filed claims under the Pandemic Unemployment Assistance (PUA) program for workers not usually eligible for government benefits -- a smaller than normal number only because that program briefly lapsed at the end of December.

"Brace (for) job creation to be flat-to-negative when the data (for) December comes out tomorrow," Diane Swonk of Grant Thornton wrote on Twitter, predicting an increase of 100,000 jobs that "is not significantly different than zero for the month."

- Down to the wire -

Congress spent December negotiating a massive spending package that renewed programs like PUA, which outgoing President Donald Trump signed only after that aid lapsed briefly.

With Democrats set to control both the House and Senate, Congress will likely pass another stimulus measure once President-elect Joe Biden takes office later in January.

Spriggs said that money could help stem the economic bleeding, particularly if it targets relief at the unemployed and local governments administering vaccines -- without which, the economy will not recover.

"There really is no substitute for this. The longer this goes the deeper the scarring," he said of the pandemic.

cs/hs