Across US and Europe, Pandemic's Grip on Economies Tightens as Jobless Claims Surge

Montrell McGraw can no longer drive. The 26-year-old in New Orleans just canceled his car insurance because his unemployment check, $222 a week, will not stretch to cover the payments. He is also behind on rent. When Washington was paying an extra $600 a week in jobless aid, he says, he managed all of his bills. That program ended in July.

McGraw lost his job as a cook at a Hilton hotel in New Orleans in March, just after the virus broke out in the United States. He has applied for 35 jobs without success. His experience is in restaurants, and few are hiring. Most of the openings he sees are in trucking or on offshore oil rigs, which require certifications he cannot afford, and searching without a car will be harder still. He has worked with an advocacy group, Step Up Louisiana, to push for an extension of benefits. "I didn't ask for this — no one asked for this pandemic," he said, adding that he is trying to play the cards he was dealt, and has a really bad hand. If Congress extends aid, he said, "Maybe then I can get my car insurance back."

His situation sits inside a larger set of numbers released Thursday. The government reported that 853,000 Americans applied for unemployment benefits last week, up from 716,000 the week before and the most since September. Before the pandemic paralyzed the economy in March, weekly claims typically ran around 225,000. The report made clear that many companies are still shedding workers as states reimpose business shutdowns and consumers avoid shopping, travel and dining out.

The increase was broad. New claims rose by more than 47,000 in California, 31,000 in Illinois, 17,000 in New York and 13,000 in Georgia. Texas, which has generally not imposed stricter business rules, saw claims jump by nearly 20,000 to 45,000. Some of the rise may reflect a rebound after claims dipped during Thanksgiving week, but it was far larger than most economists expected.

Another worrying detail: the number of people receiving state unemployment aid rose from 5.5 million to 5.8 million, the first increase in three months, suggesting some employers have pulled back on hiring. AnnElizabeth Konkel, an economist at the job site Indeed, said this could mean the December jobs report, due in early January, shows a net loss of jobs for the first time since April. "Today's report is the first overt signal of a backward slide," she said. "It's evident the labour market is still in crisis." Gus Faucher of PNC Financial said the virus is hitting consumers, the labour force and businesses alike, and that "there are reasons to be concerned."

Other indicators point the same way. Card data from Opportunity Insights, a research centre affiliated with Harvard and Brown, showed debit and credit spending down nearly 12% from a year earlier in the week ending Nov. 29, compared with a 2.3% decline the week before. Employers added jobs in November at the slowest pace since April, and restaurants, bars and retailers all cut positions.

Across the Atlantic, the European Central Bank said Thursday it will expand its bond-buying program to hold down long-term interest rates and encourage borrowing and spending. The announcement came on the day Germany, Europe's largest economy, recorded its highest single-day virus death toll, and as France shut restaurants, bars, gyms, movie theatres and museums.

The U.S. Federal Reserve meets next week and may give more detailed guidance on how long its own bond purchases will continue, which could reassure markets. It could also shift purchases toward longer-term bonds, though most analysts expect it to hold that step in reserve.

The deadline that matters most to people like McGraw is Dec. 26. More than 19 million Americans rely on some form of jobless benefit, and nearly half could lose it when two federal programs created in the spring expire: one covering self-employed and contract workers, the other adding 13 weeks of aid. A bipartisan group of senators has proposed a $908 billion package that would extend both for four months; without it, more than 9 million people lose benefits. With a vaccine nearing approval, many economists expect a strong rebound next year, but most say another relief package is urgently needed to carry unemployed workers, small businesses and state and local governments until then.