By Eric Morath 

The labor market's recovery is showing fresh signs of losing momentum as persistently elevated applications for unemployment benefits show layoffs remain historically high despite summer hiring.

Weekly initial claims for jobless benefits fell by 33,000 to a seasonally adjusted 860,000 in the week ended Sept. 12, the Labor Department said Thursday. The number of people collecting unemployment benefits through regular state programs, which cover most workers, decreased by 916,000 to about 12.6 million for the week ended Sept. 5.

The coronavirus pandemic and related shutdowns caused both unemployment applications and payments to rise to the highest levels on record back to the 1960s this spring.

After sharply falling later in the spring and early summer, new applications have largely held steady since early August. The declining number of people receiving state benefits likely reflects that workers are finding new jobs, or are being recalled to old ones. But it also shows some workers who applied for benefits in March have hit the six-month limit set in many states.

Both figures remain above any recorded level before this year.

"While there is some rehiring going on, longer term labor market scarring is occurring as well," said AnnElizabeth Konkel, economist at job search site Indeed. She added the economy has improved substantially since spring but "a fuller labor market recovery appears to have stalled out."

The labor market has partially recovered from the severe downturn caused by the coronavirus pandemic and related shutdowns of businesses. Employers through August have replaced about 11 million jobs of the 22 million shed in March and April at the beginning of the pandemic. But the pace of hiring slowed later in the summer, and layoffs have remained persistent.

Companies from bakery chain Maison Kayser to apparel company Under Armour to hotel operator Marriott International Inc. are among those warning of job cuts in recent weeks. Still, layoffs this summer were more than offset by hiring. And Amazon.com Inc. this week said it plans to hire 100,000 additional employees in the U.S. and Canada.

The Labor Department's weekly unemployment-benefits report provides data on regular state programs -- which have served as an economic bellwether for a half-century -- as well as details from two pandemic-specific programs first implemented in March.

The larger of those programs -- available to the self-employed, gig workers and others not typically eligible for unemployment aid -- paid benefits to about 14.5 million workers in the week ended Aug. 29, on an unadjusted basis, according to the Labor Department. However, analysts are skeptical about that figure. It exceeds the number of people paid under state programs, which insure about 146 million workers. At the end of last year, there were about 10 million self-employed workers, according to the Labor Department.

State reporting and accounting errors are causing the Labor Department to overstate the figure, said Andrew Stettner, senior fellow at the left-leaning Century Foundation who studies the unemployment system. He estimated about 10 million people are being paid benefits under the program. He said such errors are to be expected from a new program that was set up quickly.

The Labor Department is monitoring Pandemic Unemployment Assistance claims data to identify potential anomalies and is working with states where the claims load appears to be overstated, a spokesman said.

The Pandemic Unemployment Assistance program is also more susceptible to fraud, said Wayne Vroman, an economist at the Urban Institute, who also studies unemployment. While state unemployment programs are tied to businesses' tax records, the pandemic program asks self-employed workers to report their own income and other information, opening the system up to abuse.

"There has to be a lot more fraud," Mr. Vroman said. "Eventually you're supposed to verify eligibility against individual tax forms, but I don't think states have time to check on accuracy of the income reporting."

A second pandemic program pays 13 additional weeks of benefits to individuals who have exhausted their regular unemployment benefits. Enrollment in that program rose to 1.5 million in the Aug. 29 week, its highest recorded level. That is consistent with recipients migrating from state programs, where enrollment is falling.

A high number of workers tapping those emergency benefits shows many workers, particularly those that held part-time positions and those with jobs tied to still sparsely populated downtowns, malls and universities, are vulnerable, said Bradley Hardy, an economist at American University in Washington, D.C.

"Unemployment is down from its peak, but I remain concerned," he said. "If you have the flu season combined with a potential second wave, I'd be concerned about forecasting continued improvement in the job market."

In addition to the emergency programs, Congress had authorized federal funding for an extra $600 a week in unemployment benefits on top of amounts paid by states. Those benefits expired at the end of July. In early August, President Trump issued an executive action allowing states to tap $44 billion disaster-relief funds for $300 a week in enhanced aid.

Since then, the Federal Emergency Management Agency has distributed more than $35 billion in funds to 49 states, Guam, the U.S. Virgin Islands and the District of Columbia, an agency representative said Wednesday. South Dakota didn't seek the funds. States are authorized to make the $300 enhanced payments for no more than six weeks.

While unemployment remains elevated, demand for labor is increasing in some industries, said Karen Fichuk, chief executive of Randstad North America.

She said her company is seeing more placements at auto-manufacturing firms, companies tied to loan refinancing, and at warehouses and call centers, the latter two reflecting growth in online shopping. Randstad has 13,500 open positions, including entry-level warehouse jobs that start at $12 an hour and call-center jobs that can be done from home and pay as much as $20 an hour.

The staffing firm is offering training to those who lost jobs in the hard-hit hospitality industry. Ms. Fichuk said their customer-service skills make those workers good fits at call centers.

"We are seeing a lot of momentum," she said. "There's still decreased employment in some areas, but there are plenty of pockets of opportunity."

Write to Eric Morath at eric.morath@wsj.com

 

(END) Dow Jones Newswires

September 17, 2020 10:33 ET (14:33 GMT)

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