Continuing Job Losses Put Spotlight on Economic Relief

Even as it tries to right a shipwrecked economy, the Biden administration confronted fresh evidence of weakness Thursday with the report of nearly a million new state unemployment claims, heightening calls for fresh stimulus efforts.

The scale of the job losses underscores the fragility of the job market as overall economic momentum slows amid the worsening pandemic. What’s more, key provisions of the $900 billion aid package passed by Congress last month will lapse in mid-March, well before economists expect mass vaccinations to help the economy rebound.

“Unfortunately, the labor market started 2021 with very little momentum,” said Greg Daco, chief U.S. economist at Oxford Economics. “There hasn’t been any improvement, and if anything, there has been deterioration.”

It is a perilous start for the administration, which is eager to make good on President Biden’s pledge to “build back better” but must first halt the damage as employers continue to let workers go.

The Labor Department said Thursday that 961,000 workers filed initial claims for state unemployment benefits last week. On a seasonally adjusted basis, the total was 900,000.

The figures were down from the previous week but remain extraordinarily high by historical standards and have recently reached levels not seen since midsummer. In the comparable week a year ago, before the pandemic, there were 282,000 initial claims.

“It’s staggering, and it was worse than I thought,” said Diane Swonk, chief economist at the accounting firm Grant Thornton in Chicago. “This makes stimulus more urgent.”

Mr. Biden found a similar predicament when he became vice president in 2009 with a contracting economy and Republican opposition to a big stimulus package. Although there are bright spots that didn’t exist then, like a rally on Wall Street and a strong housing market, White House officials want to avoid the lasting economic damage and slow growth that resulted from that recession.

On Thursday, the administration pointed to the latest data to make its case for new spending.

“This morning’s report on new unemployment claims is another stark reminder that we must act now,” said Brian Deese, director of the National Economic Council. The situation, he said, “will only worsen if bold action isn’t taken.”

Mr. Biden has proposed a $1.9 billion stimulus package that would include $1,400 in direct payments to individuals, expanded unemployment benefits and money for hard-pressed states and cities.

In written testimony released Thursday as part of her Senate confirmation process, Janet L. Yellen, Mr. Biden’s nominee for Treasury secretary, reiterated the urgency of renewed aid.

“Unemployment remains troublingly high, and millions of families are facing hunger or the risk of eviction,” Ms. Yellen, a former Federal Reserve chair, told a questioner. “Additional relief is needed to strengthen the economy, address our public health challenge and provide relief to communities that have been hardest hit.”

Republicans have already registered resistance to another big spending plan.

“We’re looking at another spending blowout,” Senator Patrick J. Toomey of Pennsylvania said at Ms. Yellen’s confirmation hearing on Tuesday. “The only organizing principle I can understand, it seems, is to spend as much money as possible, seemingly for the sake of spending it.”

Democrats hope to push a coronavirus relief package through Congress in the coming weeks, with House Democrats postponing votes until the beginning of February as committees work to translate Mr. Biden’s coronavirus plan into legislation.

“We’ll be doing our committee work all next week so that we are completely ready to go to the floor when we come back,” the House speaker, Representative Nancy Pelosi of California, said at her weekly news conference on Thursday.

But with Ms. Pelosi yet to send the House’s article of impeachment against former President Donald J. Trump to the Senate, and with Senate leaders at odds over the terms of how to organize an evenly split chamber, it is unclear how quickly legislation can be processed. Democrats are also leaving open the possibility of using a process called budget reconciliation, requiring only a simple majority for approval, to push legislation through the Senate.

A bipartisan group of 16 senators — including some who helped jump-start negotiations over the most recent coronavirus relief package — is expected to speak with Mr. Deese in the coming days about additional relief.

The job losses have worsened in recent weeks, as new restrictions and lockdowns force service-sector employers like restaurants and leisure and hospitality establishments to close. If the trend continues, it could threaten other industries.

“The level of layoffs is very high, and the virus is causing serious disruption,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

“More aid is needed for households and businesses,” she added. “Many businesses will shut down, and a lot of jobs will be lost without it. That poses a downside risk for the economy in the near term.”

In another sign of weakness, the Labor Department reported this month that employers cut payrolls by 140,000 in December, the first decline since the mass layoffs of last spring.

The beginning of vaccinations provided optimism about a quick turnaround. The slow rollout in many parts of the country has set back those hopes, though the stimulus package last month helped allay fears of a double-dip recession.

Among the emergency federal programs extended by the recent legislation was Pandemic Unemployment Assistance, which helps freelancers, part-time workers and others normally ineligible for state jobless benefits. A total of 424,000 new claims were filed under the program last week, up from 285,000 the previous week.

Mr. Daco of Oxford Economics said uncertainty about the program’s continuation might have held back claims late last year, so the jump last week could be due to belated filings as well as the overall weakness of the labor market.

But Pandemic Unemployment Assistance and a $300 weekly supplement to state and federal unemployment benefits will both expire in mid-March without new legislative action.

Ms. Farooqi said meaningful improvement in the economy was unlikely by then.

“It’s going to be pretty rough over the next few months,” she said. “My expectation was and still is, at this level of infections, you will see layoffs mounting.”

Over all, the best economic remedy is more vaccinations, said Carl Tannenbaum, chief economist at Northern Trust in Chicago.

“There is no better economic stimulus than a successful vaccine rollout,” he said. “It will reduce the risk of human interaction and provide a basis on which different types of businesses can open more durably.”

Some experts say it will take many months for most of the population to be inoculated. In the meantime, federal aid efforts are pegged to specific durations, rather than any meaningful improvement in economic conditions.

That has created a series of cliffhangers in which help has hung in the balance as millions of unemployed Americans watched the news from Washington with anxiety. Although Democratic control of both chambers of Congress gives Mr. Biden an edge, the kind of ambitious stimulus faces challenging legislative dynamics.

There are some signs of hope, despite the dismal jobs picture. The stock market has hit record highs in recent days, and the housing market continues to thrive, buoyed by rock-bottom interest rates.

Some economists think the economy could boom when vaccinations are commonplace and pent-up demand sends consumers back to restaurants, onto airplanes and cruise ships, and into deserted downtowns. But there will be more pain before relief arrives.

Emily Cochrane contributed reporting.

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