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New claims for unemployment benefits jumped to 419,000 in the week ending 17 July, the highest number since 15 May, according to the U.S. labor department.
Auto makers laid off workers as the computer chip shortage persisted, idling assembly lines, The Wall Street Journal reported.
The number was far above Dow Jones’ estimate of 350,000 and the revised 368,000 claims filed the week before.
The rising number of new claims confounded analysts, who expected the number to keep falling amid the tightest labor market in years and an increasingly successful vaccination campaign.
From April through June, 60,502 businesses reopened, website Yelp reported, the most in 12 months, including 38,725 in April, the strongest month since May 2020.
Some analysts attributed the larger number of jobless workers, in part, to the rising number of infections of the COVID virus’s Delta variant. Cases have climbed back to mid-May’s levels, although they remain only a fraction of the numbers seen over the winter.
However, the figure of continuing unemployment claims dropped to 12.6 million in the week ending 3 July, down 1.3 million from the previous week and the lowest number since March 2020.
The decision of more than 20 states to end the weekly federal $300 unemployment benefit contributed to the decrease, the WSJ said.
Layoffs and unemployment can linger even with millions of open jobs and a vigorous job market, economists told the WSJ.
The reason: jobless workers might not live in areas doing the most hiring or might lack the skills needed to qualify for positions that are open.
Still, the U.S. economy sprouted 850,000 new jobs in June, the most since August 2020, and average wages rose 3.6 percent for the month, according to CNBC.
TREND FORECAST: Tens of thousands of businesses have permanently closed, vaporizing millions of jobs; it will take time to form and capitalize enough businesses to absorb all of those displaced workers.
In addition, the growth area for new jobs is in skilled work. Many of the millions who lost jobs in hospitality and leisure businesses lack the skills needed to change careers.
Although unemployment is decreasing, it will take much longer to settle down to the rate that marked the pre-2020 economy. Moreover, with more draconian measures being imposed to fight the Delta variant, and millions of people more fearful of catching it, the Biden Bounce has flattened out. Thus, employment will rise as the economy slows down.