3.5M workers remain on jobless benefits as weekly claims rise

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Over 3.5 million Americans are still on traditional state unemployment benefits as the number of Americans seeking new claims rose last week, shattering six straight weeks of declines, the feds said Thursday.

Continuing claims rose slightly from nearly 3.5 million the week before, according to data released Thursday by the Labor Department. That figure stood at about 19 million at the same time last year, in the thick of the pandemic.

The number of Americans collecting unemployment benefits through regular state programs remains more than twice as high as before COVID-19 gutted the economy.

Including Americans on all federal pandemic-related benefits programs, the number of continuing claims was 14.8 million in the week ended May 29.

New filings for jobless claims, seen as a proxy for layoffs, rose to 412,000 last week, up from a revised estimate of 375,000 reported the prior week, the feds said Thursday.

The surprise increase ends six straight weeks of steady declines in new claims. Initial claims still remain substantially higher than pre-pandemic levels. The country was averaging just over 200,000 new claims per week in 2019.

The overall downward trend of new claims is an indication of a labor market that appears to be healing, albeit more slowly than some economists expected earlier this year.

The US added 559,000 jobs last month, fewer than the 671,000 expected by economists, with some hailing the figure as a sign of progress and others saying US hiring continues to disappoint.

The fresh data comes even as US job openings soared to a new record 9.3 million in April, according to the Labor Department. Some economists have said they expect to see more Americans fill some of those openings as the federal benefits come to an end.

At least 25 states are looking to lure workers back into the labor market by withdrawing from the federal program that provides an extra $300 in unemployment benefits every week.

President Biden confirmed last week that he would let the federal unemployment benefits program expire after Labor Day, but some states will pull out of it as soon as this week.

Some companies, politicians and economists have said the extra benefits add up to more than what businesses can afford to pay people, particularly for entry-level jobs.

Companies have reported struggles to recruit new workers amid the reopening, with many citing the pandemic-boosted federal unemployment benefits as a cause.

Other reasons for the labor crunch include fear of getting COVID-19 and school closures keeping parents at home, economists say.

Some economists have warned that the labor shortage could hold back the US economic recovery, while others have urged patience as businesses grapple with temporary issues in the hiring pool.

The White House has defended the extra benefits, saying that businesses should pay people more.

But many economists are growing increasingly worried about wage inflation driving prices further up. Companies have already begun raising prices, blaming higher labor and supply costs.

Chipotle, for example, has said it raised its menu prices by up to 4 percent to cover the costs of higher wages for employees. Executives from other major companies, including General Mills, Unilever and JM Smucker, have also warned recently about rising costs and inflationary pressures.

American shoppers are bearing the brunt of rising prices, with everything from the cost of apparel and cars to bacon and milk spiking.

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