US jobless claims rise to 1.42m as economy grapples with virus

Newly jobless Americans filed nearly 1.42 million claims for jobless benefits last week, reversing recent months of decline as the world’s largest economy grapples with a surge ian coronavirus cases.

The worse-than-expected labour Department data comes as lawmakers in Washington debate whether to extend additional weekly payments made to unemployed people provided under the $2.2 trillion CARES Act passed in March as businesses shut down to stop the spread of COVID-19.

Those closures prompted a spike in new weekly jobless benefit claims, which peaked at 6.9 million in late March but declined to 1.3 million earlier this month -- a figure nonetheless more than twice any single week of the global financial crisis 12 years ago.

But the coronavirus is surging again nationwide with nearly 64,000 new cases reported in the 24 hours to Wednesday, according to Johns Hopkins University, and some areas are pausing or rolling back reopening measures.

The rise in claims in the week ended July 18, together with the reported 974,999 people who applied for benefits under a programme for workers who would not normally be eligible, adds to fears that the United States’ tentative recovery from the coronavirus downturn is stalling.

The labour Department survey also contained evidence that some of the jobless were returning to work.

In the week ended June 11, the insured unemployment rate indicating people actually receiving benefits declined 0.7 points to 11.1 per cent. In total, more than 31.8 million people were receiving benefits in the week ended July 4, the report said.

The mixed indicators will likely be seized on by both Democratic and Republican lawmakers as they debate the fate of the $600 weekly payment the CARES Act provides to the unemployed, which is in addition to benefits from their state of residence.

Those payments will expire at the end of July. Democrats controlling the House of Representatives in May passed a measure extending the payments through the end of the year but the Republican-led Senate must agree, and it has shown no such inclination.

In an interview with CNBC on Thursday, Treasury Secretary Steven Mnuchin said President Donald Trump’s administration was opposed to extending that payment beyond the end of the month.

“We’re not going to continue it in its current form because we’re not going to pay people more money to stay at home than work,” Mnuchin said. “But we want to make sure that the people that are out there that can’t find jobs do get a reasonable wage replacement.” The government instead favors a solution providing wage replacement of 70 per cent, in addition to tax credits to spur hiring, he said. Some of the states seeing the biggest jumps in joblessness were also among those with the highest number of coronavirus cases, including Florida, where claims jumped 65,890 in the week ended July 11, and Georgia, where they rose 33,292, the labour Department said.

Stocks are stalling on Wall Street Thursday, undercut by a discouraging report showing that layoffs are picking up across the country with coronavirus counts.

The S&P 500 was 0.1% lower in midday trading, easing off a rally that had sent it higher for four straight days. Other stock indexes around the world were mixed, while all the uncertainty dominating markets helped gold rise again to its highest price in nearly nine years.

The Dow Jones Industrial Average was down 84 points, or 0.3%, at 26,921, as of noon Eastern time, and the Nasdaq composite was down 0.4%. Despite the modest declines for the major US indexes, most stocks in the S&P 500 were higher, led by several that reported stronger profits for the spring than Wall Street expected.

The day’s headline economic report was one that has taken on much more importance for markets through the pandemic: the weekly tally of workers filing for unemployment benefits. Last week, the total rose by 109,000 to a little more than 1.4 million.

It breaks a stretch of 15 straight weeks of improvements, a streak that had raised investor optimism that the recession could prove to be shorter than expected. It comes as coronavirus counts continue to rise across much of the Sun Belt, leading to more business closures.

On the opposite end, though, were several reports from major companies like Twitter and Whirlpool showing more encouraging trends in their business during the spring than Wall Street expected. Also buoying the market are hopes that Congress can agree on more aid for out-of-work Americans just as an extra $600 in weekly unemployment benefits is set to expire.

Republicans in the Senate are set to unveil their proposals for a $1 trillion COVID-19 rescue package, though finding a compromise with the Democratic-controlled House of Representatives could be more difficult than in March, when Congress produced a $2 trillion rescue package.

Whirlpool jumped 10.2% for the biggest gain in the S&P 500 after the appliance maker reported a profit for the spring that was more than double what analysts expected.

Agencies