U.S weekly jobless claims surge to two months high due to spike in Covid-19 cases

The number of Americans receiving unemployment benefits fell this month to the lowest level since March 2020, but first-time applications increased, as the country faced a rapid rise in new COVID-19 infections.

The Labor Department said Thursday that continuing payments issued via all jobless compensation programs decreased by 1.3 million in the week ending July 3, to 12.6 million, the lowest level since late March 2020.

In recent weeks, about half of the states have taken action to discontinue enhanced and prolonged unemployment benefits. The current drop was caused by the termination of pandemic initiatives in Texas, WSJ reported.

The initial jobless claims increased 51,000 to a seasonally adjusted 419,000, the highest level since mid-May. The uptick brought new claims back to levels seen in early June.

There was a significant rise in filings in Kentucky and Michigan, both of which have experienced disruptions in vehicle production owing to chip shortages.

Though analysts do not anticipate large-scale company shutdowns on the magnitude of those saw in 2020, the new wave of illnesses poses a risk to the economy. The business cycle date committee of the National Bureau of Economic Research stated on Monday that the pandemic recession, which began in February 2020, concluded in April 2020.

Despite last week's rise, both initial and continuing claims have been trending lower this year, owing to a strengthening economy and sustained hiring.

Employers in the United States added 850,000 jobs in June, the most in ten months, while employees' pay increased rapidly, indicating a stronger labor market.

At least 20 states, led by Republican governors, have withdrawn from federally sponsored unemployment programs, including a $300 weekly payout that companies argued encouraged unemployed Americans to stay at home.

Though, the recent surge of coronavirus cases may intensify criticism of states that have terminated federal payments.