Unemployment Claims Show Continuing Pressure on Job Market

New claims for unemployment benefits remained high last week, the government reported on Thursday, the latest evidence that the pandemic-racked economy still has a lot of lost ground to make up in the new year.

The labor market has improved since the coronavirus pandemic first pummeled the economy. But of the more than 22 million jobs that disappeared in the spring, 10 million remain lost.

With a recently enacted $900 billion relief package that includes an extension of federal unemployment benefits, most of the jobless can at least look forward to more financial help.

Still, “this winter is going to be very difficult,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics. “We’re seeing overall economic momentum is slowing, and that feeds through to the labor market.”

“Employers are very cautious about rehiring at the same time they have had to increase layoffs,” Ms. Bostjancic said, “but the resurgence of the virus is really the main culprit here.”

A fuller picture of December employment will come Friday when the Labor Department releases its monthly jobs report, and most analysts are expecting minor payroll gains — or even the first net loss since April.

As for Thursday’s report, a total of 922,000 workers filed initial claims for state benefits during the final week of 2020, the Labor Department said. In addition, 161,000 new claims were filed under the federal Pandemic Unemployment Assistance program, which covers freelancers, part-time hires, seasonal workers and others who do not normally qualify for state unemployment benefits.

Neither figure is seasonally adjusted. On a seasonally adjusted basis, new state claims totaled 787,000.

There was a sharp increase in claims for extended state benefits — payments to the long-term unemployed whose regular benefits have run out. But new claims for Pandemic Unemployment Assistance fell, most likely reflecting the exhaustion of benefits before Congress acted.

Some fuzziness surrounding the count could be related to the difficulty of seasonally adjusting the numbers over the holidays, said Ernie Tedeschi, the head of fiscal analysis at Evercore ISI. The unadjusted number for new state claims was up by 77,000 from the previous week, while the seasonally adjusted number scarcely budged.

But longer-term trends, Mr. Tedeschi noted, are more meaningful than any week-to-week changes.

Several states say they are moving quickly to restore federal unemployment benefits that lapsed last month when President Trump delayed signing a second round of federal pandemic relief.

A handful, including New York, Texas, Maryland and California, say they have started sending out the weekly $300 supplement that was part of the legislation, while others, like Ohio, say they are awaiting more guidance from the U.S. Labor Department.

“At least half of the states should have something up by next week,” said Michele Evermore, a senior policy analyst at the National Employment Law Project, a nonprofit workers’ rights group.

Congress approved 11 weeks of additional benefits, and the entirety will ultimately be delivered to eligible workers even if payments are initially delayed.

“Any claims for the first week will be backdated,” said James Bernsen, deputy director of communications at the Texas Workforce Commission.

In addition to providing a $300-a-week supplement for those receiving unemployment benefits, the $900 billion emergency relief package renews two other jobless programs created last March as part of the CARES Act.

One is Pandemic Unemployment Assistance; the other is Pandemic Emergency Unemployment Compensation, which extends benefits for workers who have exhausted their state allotment.

This latest round also offers additional assistance for people who cobble together income by combining a salaried job with freelance gigs. The new program, called Mixed Earner Unemployment Compensation, provides a $100 weekly payment to such workers in addition to their Pandemic Unemployment Assistance benefits.

While the availability of vaccines will speed the economy’s return to normal, employers remain wary about hiring, job recruiters say.

Job postings and hiring typically fall off at the end of December, and the trend after the latest holiday season has been more pronounced than usual. “Right now, employers are still cautious related to their work force strategy,” said Amy Glaser, senior vice president at the staffing firm Adecco USA.

The rebound has been bumpy, and employers have responded in kind, retaining flexibility to increase or reduce their staffing through the use of temporary workers, Ms. Glaser said. That could mean that more people are cycling through jobs.

Julia Pollak, a labor economist at the online job site ZipRecruiter, has seen the same caution.

“Employers are being apprehensive, and job seekers are not yet flocking back to the market in droves, either,” Ms. Pollak said. “The virus is still spreading, hospitalizations have hit a new record, and there is a pullback in demand for certain services. A lot of stay-at-home orders and restrictions are causing a further decline.”

Some industries have managed to thrive. A key measure of manufacturing, for instance, rose this week to its highest level since 2018. Construction spending and employment have grown along with a surge in home buying. Staffing agencies say they have seen hiring in the automotive business and financial services. The demand for warehouse and delivery workers also remains strong.

One of the biggest trends has been the increase in customer service workers and call center representatives operating from home, Ms. Glaser of Adecco said. Those jobs require greater digital literacy than in the past, she said, because individuals must be able to set up their computers and solve problems themselves.

“There is no tech person sitting down the hallway,” she said.