By Sarah Chaney and Kim Mackrael 

The number of applications for unemployment benefits has held steady in September at just under 900,000 a week, as employer uncertainty about the economic recovery six months into the coronavirus pandemic continued to restrain hiring gains.

Jobless claims increased slightly to 870,000 last week from 866,000 a week earlier, according to Thursday's Labor Department report. The totals remain well above pre-pandemic peaks but are down significantly from nearly 7 million in March.

The labor market has added jobs in the prior four months after steep declines in employment at the beginning of the pandemic, helping bring down the jobless rate to 8.4% in August from near 15% in April. But the pace of gains has slowed recently, and persistently elevated jobless claims in September point to continued cooling in the jobs market.

One reason is layoffs have continued at a high rate. Some employers that held on to workers at the beginning of the economic crisis are now reducing their head counts due to persistently weak demand. A rise in coronavirus cases this summer also triggered new business restrictions and related layoffs, and some small businesses that had relied on government aid to keep workers on payrolls had to cut staff when that money ran dry. The Labor Department will provide an updated look at the jobs market in September on Oct. 2.

At the same time, many workers are also returning to their previous jobs or finding new ones, but not at a high enough rate to offset overall job losses from earlier in the pandemic. Re-employment has also contributed to a decline in the number of people collecting unemployment benefits through regular state programs, which cover most workers. So-called continuing claims decreased by 167,000 to about 12.6 million for the week ended Sept. 12.

"The labor market is not out of the woods yet. It's still a very challenging and weak labor market, but that said...it's moving in the right direction," said Kathy Bostjancic, an economist at Oxford Economics.

Unemployment rates in regions across the nation moved down this summer after peaking in April, when the coronavirus first triggered widespread lockdowns. Still, jobless rates remained particularly high, on average, in the Northeast and West, and clocked in above 10% in 10 states in the U.S. last month.

Millions of workers are collecting jobless benefits through a federal pandemic program for the self-employed, gig workers and others not typically eligible for unemployment aid. At the beginning of September, about 11.5 million people were claiming benefits through this program, a decrease of about 3 million from a week earlier, driven by a large drop in California, according to the Labor Department. Many economists are skeptical about the accuracy of pandemic claims figures, given the sharp revisions to the numbers and widespread unemployment fraud tied to the program.

Large swaths of the economy are showing signs of slowly regaining ground as the pandemic passes its half-year mark. Consumer spending and job gains continued in August but at a slower pace than earlier in the summer. U.S. service-sector and manufacturing companies reported solid but cooling growth in September. Earlier this week, Federal Reserve officials implored Congress to enact more fiscal stimulus to boost the speed of the recovery.

Economists expect the initial hiring spurt from business reopenings to ease as state restrictions are lifted at a slower pace than in early summer.

"We're getting to that point where the easy hiring is behind us," said Ryan Sweet, an economist at Moody's Analytics. "This next leg of the recovery is going to be much more driven by the underlying strength of the economy rather than businesses just recalling workers."

Many employers brought back a portion of their furloughed employees but are finding sales are too weak to raise employment to precrisis levels.

Peter Merriman reopened four of the nine restaurants he owns across Hawaii in August, but slow sales meant he could hire back only about 40% of the staff who were working at those locations before the pandemic began. He said sales at those restaurants, which operate under the Merriman's Restaurants brand, are down about 80% from the same period last year.

"It's really scary," Mr. Merriman said. "We know that we'll eventually come back, it's just a question of when and how."

Many workers are experiencing monthslong spells of unemployment. In the first week of September, about 1.6 million individuals were collecting benefits through a federal program that provides an additional 13 weeks of benefits for people who run through the benefits' duration set by states. Benefits last for six months in many states.

Taylor Bakley lost her part-time hosting job at a restaurant when the pandemic started, and hasn't been able to find work since then. Ms. Bakley, who lives in Big Spring, Texas, said she has applied for nearly two dozen jobs since she finished high school in May, including a cashier position at the Dollar General.

"I've been applying like crazy, but it's so hard to get a job right now, " she said.

Ms. Bakley, 18 years old, said she is living with her grandmother and isn't expected to pay rent, but still has to pay her car bills and insurance and is hoping to save money for college.

In addition to the federal emergency programs, Congress also passed legislation this spring authorizing federal funding for an additional $600 a week in unemployment benefits. After those benefits expired, President Trump signed an executive order last month to replace them with an additional $300. The $300 top-off payments will only last up to six weeks, and Congress has yet to reach an agreement on a new federal jobless benefit.

Write to Sarah Chaney at sarah.chaney@wsj.com and Kim Mackrael at kim.mackrael@wsj.com

(END) Dow Jones Newswires

September 24, 2020 15:48 ET (19:48 GMT)

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