U.S. jobless claims rose last week for the first time since March, the clearest sign yet of a pause in the economic recovery as coronavirus cases surge in much of the country and force businesses to close their doors once again.

Initial claims through regular state programs increased to 1.42 million in the week ended July 18, up 109,000 from the prior week, a Labor Department report showed Thursday; on a non-seasonally adjusted basis, claims declined. There were 16.2 million who filed for ongoing benefits through those programs in the period ended July 11, down from the prior week and less than forecast.

Economists in a Bloomberg survey had forecast 1.3 million initial claims, little changed from the prior week, with projections as high as 1.55 million. The four-week average, a less-volatile figure, fell by the least since April.

U.S. stocks fell at the open, while 10-year Treasury yields remained lower after the report. The jobless claims figures may reflect both renewed closings of businesses such as restaurants, as well as layoffs at other firms that have seen a sustained dropoff in revenue.

Other challenges for the labor market include the imminent potential expiration of supplemental federal jobless benefits, and the widespread struggles of businesses that rely on in-person interaction, such as restaurants and airlines.

“Because of resurgence of the virus, a lot of firms that thought they were going to be opening up are instead not opening up,” said Robert Brusca, president of Fact & Opinion Economics. “While parts of the economy are still recovering, doing better, there are substantial parts, like in the service sector of the economy, that are really feeling the pain.”

Seasonal Caveat
One caveat is that the headline figure was inflated by seasonal adjustments. The Labor Department said its seasonal factors had assumed an unadjusted decline of about 247,000 initial claims; the count fell by about 142,000. That resulted in an increase of more than 100,000 after the department applied its seasonal adjustment.

Ian Shepherdson of Pantheon Macroeconomics said there are normally seasonal swings in claims due to automakers’ annual summer shutdowns and reopenings, which largely didn’t happen this year because of the earlier closings due to the pandemic. “That meant unadjusted claims didn’t rise in early June, but it also meant they didn’t fall as much as usual this week,” Shepherdson wrote in a note.

The data showed initial claims in California -- the most populous state and a hotspot for the virus -- rose on an unadjusted basis last week. Other states with increases included Alabama, Connecticut, Nevada and Tennessee. Declines were reported in Florida, Georgia, Texas and New Jersey.

The latest layoffs may weigh on July’s monthly employment figures, as last week included the 12th of the month, making it the reference period for the jobs report due Aug. 7.

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