US jobless claims fall below 1 million but remain high

Washington — The number of Americans applying for unemployment dropped below 1 million last week for the first time since the coronavirus outbreak took hold in the U.S. five months ago, but layoffs are still running extraordinarily high.

Filings in Michigan also dropped last week, the lowest weekly total since the start of the coronavirus pandemic. The state reported 14,462 new claims during the week ending Aug. 8. That's down from a high of 388,554 claims during the first week of April. But it's still a nearly 240% increase from the same week last year, when less than 4,300 claims were filed. 

The figures show that the crisis continues to throw people out of work just as the expiration of an extra $600 a week in federal jobless benefits has deepened the hardship for many — and posed another threat to the U.S. economy.

Applications for jobless benefits declined to 963,000, the second straight drop, from 1.2 million the previous week, the government said Thursday. That signals layoffs are slowing, though the weekly figure still far exceeds the pre-outbreak record of just under 700,000, set in 1982.

The virus is blamed for more than 166,000 deaths and 5.2 million confirmed infections in the U.S. — easily the highest totals in the world. The average number of new cases per day is on the rise in eight states, and deaths per day are climbing in 26, according to an Associated Press analysis.

Worldwide, the scourge has claimed more than 750,000 lives and caused over 20 million known infections.

In Detroit, a new survey by University of Michigan researchers shows residents are going back to work but many report they still are in "financial trouble."

The survey, conducted from July 15-29, found the city's unemployment rate dropped from 48% in May and June to 38% in late July. But roughly 1 in 5 Detroiters report they are in financial trouble, with more than half saying they worry they won't be able to afford the food they'll need in August. 

"We are starting to see a corner being turned in terms of unemployment," said Lydia Wileden, a research associate with the UM’s Detroit Metro Area Communities Study and doctoral candidate. "We still don't know the long-term effect.

"Who knows how this might set the city and the region back again."

The virus, the shutdowns meant to fight it and the reluctance or inability of many people to shop, travel or eat out continue to undermine the economy and force companies to cut staff. Over the past few months, 23 states have paused or reversed their business re-openings because of a resurgence of the virus.

Overall, fewer people are collecting unemployment, a sign that some employers are hiring. The total declined last week to 15.5 million, from 16.1 million the previous week.

“Another larger-than-expected decline in jobless claims suggests that the jobs recovery is regaining some momentum, but ... much labor market progress remains to be done,” said Lydia Boussour, senior economist at Oxford Economics.

Overall hiring is believed to have slowed since the spring, when states reopened and millions of workers at bars, restaurants and stores were rehired. The job gain in August will probably fall short of the 1.8 million added in July, analysts say.

Michigan's unemployment rate in June was 14.8%, a 6.5 percentage-point decrease from May’s 21.3% unemployment rate.

Between March 15 and July 24, the state of Michigan paid $19 billion to close to 2 million claimants, according to the Unemployment Insurance Agency.

For months, on top of their state benefit, unemployed Americans also collected the $600 a week in federal jobless aid. But that expired at the end of July, and negotiations in Congress to extend it, probably at a lower level, have collapsed in rancor.

Last week, President Donald Trump issued an executive order that would provide $300 a week to replace the expired $600. But experts say it could take weeks for the states to reprogram their computers and process and dispense the payments.

A crush of benefit applications earlier in the outbreak resulted in huge backlogs that left millions of the unemployed waiting. Washington state went so far as to call in the National Guard to help process applications.

Some economists say they believe the end of the $600 has contributed to the drop in unemployment claims of late. Some of the unemployed may feel less incentive to apply.

The supplemental federal aid had enabled many jobless Americans to afford rent, food and utilities, and its expiration threatens to weaken consumer spending.

Jason Grobbel, president of E.W. Grobbel Sons, a food processor in Detroit's Eastern Market, said he believes the boosted unemployment benefits was one reason people haven't been applying at his business. He also said many are worried about catching COVID-19 while others might be caring for children not in school. 

"Every business operator I know is struggling to get people," Grobbel said.

Grobbel wants to hire more than 150 as production workers with starting pay from $14 to $20 an hour. 

Michelle Meyer, an economist at Bank of America Merrill Lynch, said the loss of the additional aid will reduce Americans’ incomes by $18 billion a week.

“That’s a big hit to purchasing power,” she said.

In addition to people who applied last week for state benefits, nearly 489,000 others sought jobless aid under a new federal program that has made self-employed and gig workers eligible for the first time. That figure isn’t adjusted for seasonal trends, so it is reported separately.

Counting those receiving aid under the new program would bring to 28.2 million — roughly 18% of the U.S. workforce — the number of Americans now receiving some form of unemployment benefits.

With confirmed virus cases still high, it’s not clear when business owners will be able to reopen or will have enough customers to rehire.

Grace Della is one of them. She opened her food tour business in Miami a decade ago with $300 from her mother. On weekends, she led the tours herself and eventually built up a business with 13 guides, averaging 10 tours a day through culinary hot spots in South Beach and Little Havana.

With scant customer demand, it has been more than four months since Miami Culinary Tours has taken out guests. Della, 46, said she hopes to reopen later this month but isn’t sure she can, given the state’s high level of confirmed infections.

Della said she tries to stay positive but confesses to moments of crippling fear. At one point, hyperventilating with anxiety, she contacted firefighters.

“There’s no money coming in,” Della said. “We’re all scared.”

Detroit News Staff Writer Christine MacDonald and the Associated Press contributed.