In the week ending Jan. 9, the number of citizens filing for unemployment benefits jumped by 181,000 from the previous week's downwardly revised level of 784,000, as reported by the Bureau of Labor Statistics (BLS).
"The start of the year usually sees a surge in filings (unadjusted claims reached 1.15 million) and the timing of holidays makes seasonal adjustment particularly hard this time of year, but that cannot fully explain away the rise," Wells Fargo Securities' economist Sarah House said, adding that "the worsening state of the pandemic is bearing down on the labor market."
BLS data also showed that the number of people continuing to collect regular state unemployment benefits in the week ending Jan. 2 increased by 199,000 to 5.27 million.
Meanwhile, the total number of people claiming benefits in all state and federal programs for the week ending Dec. 26 decreased by 744,511 but remained elevated at 18.4 million, as the country struggles to grapple with the fallout of the surging COVID-19 infections.
Margins of slack in the US labor market during the pandemic. The fall in labor force participation since February is now a bigger factor than the rise in temporary/non-permanent unemployment. pic.twitter.com/9PFxsEmqHF
U.S. employers slashed 140,000 jobs in December, marking the first monthly decline in employment since April 2020. The unemployment rate, which has been trending down over the past seven months, remained unchanged at 6.7 percent in December.
"If we adjust the 6.7 percent headline unemployment rate for the decline in (labor) participation since February and the Bureau of Labor Statistics estimate of misclassification, the unemployment rate would be 10 percent, similar to the peak following the Global Financial Crisis," Federal Reserve Board Governor Lael Brainard said.
He also noted that the damage from COVID-19 is concentrated among "already challenged groups." For example, Federal Reserve staff analysis shows that unemployment is likely above 20 percent for workers in the bottom wage quartile, while it has fallen below 5 percent for the top wage quartile.
Labor force participation for prime-age workers has declined, particularly for parents of school-aged children, where the declines have been greater for women than for men, and greater for Black and Hispanic mothers than for White mothers, said the Fed official.