By Kim Mackrael 

New applications for unemployment benefits fell last week after a recent jump, an indication that layoffs are easing but remain high as the labor market continues to recover from the effects of the coronavirus pandemic and related restrictions.

Weekly initial claims for jobless benefits, a proxy for layoffs, fell by 75,000 to a seasonally adjusted 712,000 in the week ended Nov. 28, the Labor Department said Thursday. That follows two consecutive increases and comes amid evidence that the economy continues to recover from the spring's shutdowns, but at a slower pace. Last week's level was only 1,000 more than the lowest level recorded since March, and well down from this year's peak of nearly 7 million -- but was still higher than any level recorded before 2020.

Several economists said they see the latest decrease as a possible anomaly related to last week's Thanksgiving holiday. The data tends to be volatile around holidays, which affect states' ability to process claims.

The weekly claims data, which policy makers and investors have relied on throughout the pandemic for timely information about the labor market, came under scrutiny this week after a government watchdog said the data were flawed. A Labor Department spokeswoman said the agency is working to make changes to the weekly jobless-claims report to clarify what the numbers represent, however no substantive changes were made in Thursday's report. The spokeswoman said the department didn't anticipate any changes in methodology.

The Government Accountability Office said in a report Monday that states have provided inconsistent data to the Labor Department and incidents of fraud have distorted the numbers.

While Thursday's jobless claims were better than anticipated, "we have to be careful getting used to these numbers," said Oxford Economics economist Kathy Bostjancic. "We welcome the downtrend, clearly, but there are still very high levels of unemployment."

Ms. Bostjancic added that data can be more volatile around the holidays because of challenges with seasonal adjustment.

Still, the decline in last week's unemployment claims fits with a range of recent data suggesting the economic recovery has continued. Consumer spending and retail sales both rose in October, according to the Commerce Department, albeit at a slower pace compared with prior months. Sales of newly built homes in October remained near their highest level in more than a decade.

The Institute for Supply Management said Thursday that U.S. services activity expanded for the sixth straight month in November, and employment in the sector grew. Earlier this week, ISM said U.S. manufacturing activity grew in November, for the seventh straight month, but employment in that sector declined last month. A Federal Reserve report Wednesday said the economy's recovery picked up this fall.

Through October, U.S. employers recovered 12.1 million of the 22 million jobs that were lost in March and April. The Labor Department will release November's jobs report, its broadest accounting of the labor market, on Friday. Economists surveyed by The Wall Street Journal forecast employers added 440,000 jobs in November, a slowdown from the 638,000 jobs added in October. They expect the unemployment rate to decline to 6.7% from 6.9% in October.

But a resurgence in virus cases this fall poses a risk to the labor market recovery. Governors in multiple states, including Kentucky, New York, Illinois and Washington, tightened economic restrictions in recent weeks to try to curb the spread of the virus.

Terri Greeno, who owns four Express Employment Professionals staffing offices in the Chicago area, said employers in some industries are still struggling to fill jobs, even after Illinois Gov. J.B. Pritzker, a Democrat, placed a statewide ban on indoor dining this fall.

She said some people are staying out of the workforce because their child-care options are limited, while others seem reluctant to move into a different industry. "There are jobs," Ms. Greeno said. "Anything in supply chain manufacturing or distribution is extremely busy."

Thursday's report showed continuing claims, an approximation for the number of people collecting unemployment benefits through regular state programs, which cover most workers, decreased by 569,000 to about 5.52 million for the week ended Nov. 21. That is the lowest level since March and well below a peak of 24.9 million in May -- but still three times the pre-pandemic level.

The figure doesn't precisely equal to individual workers receiving benefits because, in some cases, a single person can claim retroactive payments for more than one week of benefits, the department said this week.

The number receiving benefits through the pandemic unemployment assistance program, which is open to gig workers and others who don't typically receive benefits, fell in the Nov. 14 week, the Labor Department said Thursday. The number receiving extended benefits because they exhausted other programs increased.

The Government Accountability Office said problems with the data extended across many of the benefit programs, including those created this year. The Labor Department relies on reports from individual state unemployment offices, which have struggled to keep up with a deluge of applications this year and confronted fraudulent filings.

Louisiana corrected jobless claims data for the weeks ending Nov. 14 and Nov. 21 after it detected a spike in claims tied to fraud. With the revisions, the state's claims data for those weeks will be lower than previously reported, according to a Louisiana Labor Department spokesman.

As it works to address the fraud through new security measures, Louisiana's Labor Department halted payments for new claims filed after Nov. 5. The department is requiring claimants to upload "identity verification documents," according to a press release issued last week.

Many economists anticipate the labor market recovery will remain tempered until a vaccine is widely available. Once that happens, "some of these jobs may start to come back," said Jevay Grooms, an economist at Howard University. Other job losses may be permanent, she said, with lower income earners, including many women and people of color, more likely to remain outside the labor force for longer.

Lance Burwell said he was furloughed from his job as a resort manager near Lake Tahoe soon after California declared a state of emergency in March, and was laid off permanently 2 1/2 months later.

Mr. Burwell, who since relocated to Colorado, said he owes about $28,000 in missed monthly mortgage payments, and had to withdraw $35,000 from his retirement plan to cover living expenses.

Mr. Burwell is branching out to industries beyond hospitality, and has lowered his salary expectations, he said. This week, he interviewed for a sales supervisor job that would pay about a third of his pre-pandemic income.

"I've requested forbearance for three successive quarters -- the next quarter being Jan. 1," Mr. Burwell said. "I hope to God I have a job by then."

Sarah Chaney Cambon contributed to this article.

Write to Kim Mackrael at kim.mackrael@wsj.com

(END) Dow Jones Newswires

December 03, 2020 10:53 ET (15:53 GMT)

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