The number of Americans filing for unemployment benefits rose last week for the first time in nearly four months, suggesting the labor market was stalling amid a resurgence in new COVID-19 cases and depressed demand.

People who lost their jobs wait in line to file for unemployment following an outbreak of the coronavirus disease (COVID-19), at an Arkansas Workforce Center in Fayetteville, Arkansas, U.S. April 6, 2020. REUTERS/Nick Oxford
Initial claims for state unemployment benefits increased to a seasonally adjusted 1.416 million for the week ended July 18, from 1.307 million in the prior week, the Labor Department said on Thursday. That was the first weekly rise in applications since the week ending March 28, when claims raced to a record 6.867 million as nonessential businesses like restaurants and gyms were shuttered to slow the spread of the coronavirus.
Economists polled by Reuters had forecast 1.30 million applications in the latest week.
Cases of the respiratory illness have exploded across the country, prompting some authorities in the hard-hit South and West regions to either shut down businesses again or pause reopenings. Workers being sent back home again are joining the second wave of layoffs, triggered by lack of demand as the economy battles a recession, which started in February.
Last week’s claims data covered the period during which the government surveyed businesses for the nonfarm payrolls component of July’s employment report.
Economists expect job growth to pull back this month after surging by a historic 4.8 million in June. Employment last month was boosted by the government’s Paycheck Protection Program, which provides business loans that can be partially forgiven if used for wages. Though the PPP was extended to Aug. 8, many small businesses drew their loans in May and June.
The Federal Reserve’s Beige Book report of anecdotal information on business activity collected from contacts across the nation, published last week noted “new layoffs” across districts. The U.S. central bank added, “many contacts who have been retaining workers with help from the PPP said that going forward, the strength of demand would determine whether they can avoid layoffs.”
Demand has been showing signs of picking up, with retail sales increasing strongly in May and June, supported by the government’s additional weekly $600 checks for the unemployed.
This benefit will end on July 31, leaving millions of gig workers and the self-employed among others, who do not qualify for regular state unemployment insurance, without an income.
Some states have capped weekly unemployment checks at under $300. Thursday’s report showed the number of people receiving benefits after an initial week of aid fell to 16.197 million in the week ending July 11, from 17.304 million in the prior week. These so-called continued claims, which are reported with a one-week lag, topped out at a record 24.912 million in early May.
Worker applications for unemployment benefits have remained at historically high levels after easing for months from a peak early in the coronavirus pandemic, suggesting layoffs remain elevated and the labor market’s recovery is cooling.
In recent weeks, initial claims for jobless benefits have settled around 1.3 million a week—halting what had been a steady descent from a peak of 6.9 million in late March, when the pandemic and business closures shut down parts of the U.S. economy. The level recorded in recent weeks remains well above the highest on the weekly record before this year, which was 695,000 in 1982.
While new applications have remained high, the number of Americans receiving unemployment benefits through regular state programs—which covers the vast majority of workers—has edged lower.
The modest easing on unemployment rolls suggests new layoffs are being offset by hiring and employers recalling workers. Employers added a combined 7.5 million jobs in May and June after shedding 21 million jobs in March and April, separate Labor Department data showed.
July’s leveling of new unemployment applications came as several states imposed new restrictions on businesses such as bars and restaurants when coronavirus cases rose.
“The reopening across the country has been very bumpy,” said Michelle Holder, an economist at John Jay College in New York, before Thursday’s data. “I think unemployment applications are going to be sticky at this level because many states are seeing a reassertion of the virus.”
The level of claims indicates many workers are being laid off, perhaps for a second time, and that parents who want to work are unable to access child care, she said.
Other data also show an easing in demand for labor. Job openings in July are down from June across the U.S., and Google searches for “file for unemployment” are creeping up. Growth in worker hours is waning at small businesses after several weeks of gains.
California is among the states that imposed new restrictions to deal with a surge in cases of the new coronavirus. The latest restrictions caused Jessica Jenkins, a 30-year-old hairstylist, to lose her job last week for the second time this year.