WASHINGTON, Sept. 24 (Xinhua) -- First-time claims for unemployment insurance in the United States increased slightly last week, indicating a stalled recovery in the pandemic-ravaged labor market amid congressional deadlock over more coronavirus relief.
The number of Americans filing new claims for state unemployment benefits edged up by 4,000 to 870,000 last week, marking the fifth time in the past 27 weeks that the number has come in below 1 million, the Labor Department reported Thursday.
"The labor market's recovery is occurring in fits and starts," Sarah House, senior economist at Wells Fargo Securities, wrote in an analysis, adding that the labor market's recovery is still in a "fragile" state.
As COVID-19 shutdowns rippled through the workforce, initial jobless claims spiked by 3 million to reach a record 3.3 million in the week ending March 21, and then doubled to reach a record 6.87 million in the week ending March 28.
After that, the number had been falling for 15 weeks consecutively -- though still at historically high levels -- before the trend was reversed in the week ending July 18 amid a resurgence in COVID-19 cases. The declining trend was reversed again in the week ending Aug. 15.
The latest claims report also showed that the number of people continuing to collect regular state unemployment benefits decreased by 167,000 to 12.58 million in the week ending Sept. 12.
That decline, however, might have partially reflected the exhaustion of the eligibility for benefits, as workers in most states are eligible for up to 26 weeks of benefits from the regular state unemployment program.
Meanwhile, the recipients of Pandemic Emergency Unemployment Compensation (PEUC), which provides an additional 13 weeks of benefits for those who exhaust regular state benefits, rose to 1.63 million in the week ending Sept. 5. The federal program was approved in late March as part of the 2-trillion-dollar Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Both PEUC, and the Pandemic Unemployment Assistance (PUA) program, which applies to workers who usually do not qualify for regular state unemployment benefits, such as the self-employed and gig workers, are set to expire on Dec. 31.
The Pandemic Unemployment Compensation (PUC) program, which was also part of the CARES Act and paid unemployed individuals 600 dollars per week in additional benefits, already expired at the end of July.
"Model results suggest that GDP may contract modestly if enhanced unemployment benefits expire," chief economist at Wells Fargo Securities Jay H. Bryson and econometrician Azhar Iqbal, wrote in an analysis.
The claims report showed that the total number of people claiming benefits in all programs -- state and federal combined -- for the week ending Sept. 5 declined 3.7 million to 26 million.
Thursday's data came as U.S. lawmakers are at an impasse over a new fiscal stimulus package, despite that economists, as well as Federal Reserve officials, have argued more fiscal relief is needed to sustain the economic recovery.
At a hearing before the Senate Banking Committee, U.S. Federal Reserve Chairman Jerome Powell said on Thursday that the lack of further fiscal support would pose a downside risk to the U.S. economy, which is recovering from the COVID-19 induced recession.
Powell said both employment and overall economic activity remain well below their pre-pandemic levels, and the country still has 11 million unemployed, out of the 22 million who were laid off in March and April amid COVID-19 shutdowns.
According to earlier data from the Bureau of Labor Statistics, U.S. employers added 1.4 million jobs in August, while the unemployment rate dropped to 8.4 percent. Powell said the level of unemployment is probably 3 percent higher than the official data, considering people who are misidentified as employed and the declined labor force participation.
The median projection for the unemployment rate is 7.6 percent at the end of this year, and 4 percent by the end of 2023, according to the Fed's latest economic projections. This is still above the historic low of 3.5 percent the country experienced before the COVID-19 pandemic.
Treasury Secretary Steven Mnuchin, who also testified at the congressional hearing, said he and House Speaker Nancy Pelosi agreed to resume talks on another economic relief package. The prospect for a deal, however, remains uncertain.
House Democrats unveiled a 3-trillion-dollar relief proposal in May, which didn't gain support from Republicans. Senate Republicans put forward a 1-trillion-dollar package in late July, and failed to advance a slimmed-down proposal earlier this month.
Democratic and Republican leaders have repeatedly lashed out at each other, blaming the other side for the lack of progress on more relief.
Eric Rosengren, president of the Federal Reserve Bank of Boston, on Wednesday warned that a second wave of COVID-19 infections in the fall and winter and the lack of further fiscal aid could make the U.S. economic recovery more gradual than hoped.
While additional fiscal aid is probably the more effective tool to support the economic recovery at this time, it seems "increasingly unlikely" to materialize anytime soon, the Fed official said.