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WRAPUP 3-U.S. weekly jobless claims fall; many unemployed losing benefits

Thu, 22nd Oct 2020 13:35

(Adds housing data, leading indicator, updates markets)

* Weekly jobless claims fall 55,000 to 787,000

* Continuing claims drop 1.024 million to 8.373 million

* Existing home sales jump 9.4% in September

By Lucia Mutikani

WASHINGTON, Oct 22 (Reuters) - The number of Americans
filing new claims for unemployment benefits fell more than
expected last week, but remained very high as the labor market
recovery shows signs of strain amid a relentless COVID-19
pandemic and ebbing fiscal stimulus.

While other data on Thursday showed home sales racing to a
more than 14-year high in September, economic activity is
slowing heading into the fourth quarter. A measure of the
economy's prospects increased moderately last month.

The slow and uneven recovery from the worst economic
downturn in at least 73 years and uncontrolled coronavirus
crisis could cost Republican President Donald Trump a second
four-year term in the White House when Americans vote on Nov. 3.
Trump is trailing former Vice President and Democratic Party
candidate Joe Biden in national opinion polls.

"There are still millions and millions on the nation's
unemployment rolls because many of the jobs lost during the
steepest downturn in economic history have not yet returned,"
said Chris Rupkey, chief economist at MUFG in New York. "Time
will tell if the still-record number of people out of work will
act as a brake on the economic recovery or whether the economy's
fortunes depend more on the course of the virus."

Initial claims for state unemployment benefits dropped
55,000 to a seasonally adjusted 787,000 for the week ended Oct.
17. Data for the prior week was revised to show 56,000 fewer
applications received than previously reported.

Economists polled by Reuters had forecast 860,000 claims in
the latest week. California, the most populous state in the
nation, resumed the processing of new applications after a
two-week pause in late September to combat fraud.

Unadjusted claims fell 73,125 to 756,617 last week.
Including a government-funded program for the self-employed, gig
workers and others who do not qualify for the regular state
jobless programs, 1.1 million people filed claims last week.

First-time claims have been stuck above their 665,000 peak
during the 2007-09 Great Recession, though they have declined
from a record 6.867 million in March. A more than $3 trillion
rescue package early this year provided a lifeline for many
businesses, allowing them to keep workers on payrolls. It also
lifted economic activity from the recession, which started in
February.

Though Democratic House of Representatives Speaker Nancy
Pelosi and Treasury Secretary Steven Mnuchin are working out
details of a new relief package, a deal is unlikely before the
Nov. 3 presidential election amid stiff opposition in the
Republican-controlled Senate.

With funding depleted, businesses, especially in the
transportation industry, are either laying off or furloughing
workers as demand remains subdued. More pain lies ahead amid a
resurgence in new coronavirus cases around the country, which
could lead to state and local government restrictions or more
people shunning establishments like restaurants and bars.

Stocks on Wall Street were trading lower. The dollar rose
against a basket of currencies. U.S. Treasury prices fell.

SOFT PAYROLLS NUMBER?

Last week's claims report covered the period during which
the government surveyed businesses for the nonfarm payrolls
component of October's employment report. Payrolls increased by
661,000 jobs in September, the smallest gain since the jobs
recovery started in May.

"Elevated initial jobless claims and the unwind of temporary
Census hiring means we could get a soft payrolls number," said
James Knightley, chief international economist at ING in New
York. "A weak figure would probably be a more significant
catalyst for politicians to deliver action on fiscal stimulus."

Though the claims report showed a further decline in the
number of people on unemployment rolls in early October, that
was in part due to millions exhausting their eligibility for
benefits, which are limited to six months in most states.

The number of people receiving benefits after an initial
week of aid declined 1.024 million to 8.373 million in the week
ending Oct. 10, the lowest in nearly seven months.

At least 3.296 million workers filed for extended
unemployment benefits in the week ending Oct. 3, up 509,823 from
the prior week. Economists said claims for extended benefits,
which expire in December, were understated.

"Today's report does not include 600,000 recipients in
Florida listed on the state's dashboard, as well as workers in
major states like Washington and Texas who report delays of up
to one month between programs," said Andrew Stettner, senior
fellow at The Century Foundation in New York.

A staggering 23.2 million people were on unemployment
benefits at the beginning of October.

Unemployment has, however, disproportionately affected
lower-wage workers. With many higher-paid employees working from
home, there has been a housing market boom, with home sales
jumping 9.4% to a seasonally adjusted annual rate of 6.54
million units in September, the highest level since May 2006.

But the housing market's strength is not enough to offset
weakness elsewhere. The Conference Board's index of leading
economic indicators rose 0.7% last month, slowing from a 1.4%
increase in August.

That is consistent with economists' projections for slower
growth in the fourth quarter after what is believed to have been
a record performance in the third quarter.

(Reporting By Lucia Mutikani; Editing by Jonathan Oatis and
Andrea Ricci)

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