By Lucia Mutikani
WASHINGTON (Reuters) – The number of Americans filing for unemployment benefit unexpectedly fell last week, but could rise in the coming weeks as the coronavirus pandemic causes companies to layoff workers amid supply chain disruptions and waning demand for some goods and services.
Initial claims for state unemployment benefits dropped 4,000 to a seasonally adjusted 211,000 for the week ended March 7, the Labor Department said on Thursday. Data for the prior week was revised to show 1,000 fewer applications received than previously reported.
Claims have now dropped for two straight weeks. Jobless claims are the most timely labor market indicator and are being closely monitored for clues on the coronavirus’ impact on the economy. The virus has roiled financial markets and fanned fears of a recession, prompting the first emergency interest rate cut from the Federal Reserve since the financial crisis.
Economists polled by Reuters had forecast claims rising to 218,000 in the latest week. The Labor Department said only claims for Alabama were estimated last week.
The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 1,250 to 214,000 last week.
The World Health Organization on Wednesday declared the coronavirus outbreak a pandemic. The virus, which causes a respiratory disease called COVID-19, has killed at least 38 people in the United States and sickened more than 1,300. Overall, more than 4,700 people have died from COVID-19 and over 127,000 have been infected, according to data from Johns Hopkins University.
The disease originated in China, the main source of inputs used in many factories, as well as goods consumed in the United States. While some Chinese factories have resumed operations after Beijing extended the Lunar New Year holidays in an effort to limit the spread of the virus, they are running below capacity.
The coronavirus, which causes a flu-like illness, is also hurting demand for transportation, especially air travel, as well as entertainment and recreation, and leisure and
hospitality services. There already are reports of layoffs in some of these industries.
Companies in the energy sector have also been affected as crude prices have tumbled, a plunge that has been exacerbated by an oil price war between Saudi Arabia and Russia.
The Fed last week slashed its benchmark overnight interest rate by a half percentage point to a target range of 1.00% to 1.25%. Financial markets have fully priced in a rate reduction of as much as 75 basis points at the U.S. central bank’s March 17-18 policy meeting.
Financial markets see the coronavirus as the catalyst that could derail the longest economic expansion on record, now in its 11th year. Growth estimates for the first half of this year are around 1%. The economy grew 2.3% in 2019.
The government reported last week that the economy created 273,000 jobs in February, matching January’s tally, which was the largest gain since May 2018. The unemployment rate dropped one-tenth of a percentage point to 3.5%.
Thursday’s claims report also showed the number of people receiving benefits after an initial week of aid fell 11,000 to 1.72 million for the week ended Feb. 29. The four-week moving average of the so-called continuing claims rose 5,250 to 1.73 million.
U.S. weekly jobless claims unexpectedly fall