Washington unemployment claims hit 10-week high. Here's what experts are saying about the economy.

Oct. 16--New unemployment claims in Washington state jumped to their highest level since early August as uncertainties over COVID-19 continue to blunt a jobs market recovery.

Washingtonians filed 22,324 new, or "initial," claims for regular unemployment insurance last week, a 44.1% increase from the prior week, the state Employment Security Department (ESD) reported Thursday. The nation saw 898,000 new claims last week, up 6.3% from a week earlier.

Washington's surge in claims, which rose to the highest level since the week ending Aug. 1, comes amid signs that the state's economic recovery may be slowing.

On Wednesday, the ESD reported that the state added just 2,400 jobs in September, down from a revised 69,000 in August and 62,400 in July. The state's unemployment rate for September was 7.8%, down from a revised rate of 8.4% in August.

Some of the state's surge in jobless claims reflects the usual end-of-summer dip in seasonal employment, said Anneliese Vance-Sherman, an ESD regional labor economist who covers the Seattle area. Historically, initial jobless claims start rising in October and peak in December, she said.

But she and other economists pointed to several pandemic-related trends that could be contributing to the uptick in claims as well as to slowing job growth.

One was a drop in government hiring, notably at schools, where COVID-19 policies are likely reducing employment, said Paul Turek, ESD's state economist. "A shift to remote learning apparently led to less government hiring than usual this time of year, which showed up largely in local education," Turek noted.

Another pandemic-related trend: Consumer spending still hasn't returned to pre-pandemic levels. As of Sept. 27, daily spending by Washington residents during the pandemic has been nearly 2% lower than it was on March 1, shortly before government stay-at-home orders went into effect, according to a "recovery tracker" developed by Harvard University economist Raj Chetty and colleagues.

That dip is likely feeding employers' reluctance to make new hires or retain current staff, economists say. "For employment to begin returning to pre-COVID levels, people have to feel confident ... that they are reasonably safe in going out and doing the things they would normally do -- travel, eat out, shop, etc.," said economist James McCafferty, a director at the Center for Economic and Business Research at Western Washington University in Bellingham.

Some of that depressed spending is likely driven by higher joblessness -- 300,140 Washingtonians were getting unemployment benefits last week -- as well as the end of some federal pandemic relief programs, notably a $600-a-week supplemental unemployment benefit that expired in July.

Yet McCafferty said that this year's spending decline has been even sharper -- around 7.7% -- among higher-income households whose median annual income is greater than $78,000. Purchases by these households are especially important for many of the sectors hit hardest by COVID-19, such as hospitality and entertainment.

Case in point: Jobless claims by workers in food preparation and serving jobs were up 24% last week over the prior week, the ESD said.

Consumer spending may stay low for months, in part because of health-related restrictions that limit capacity in businesses as well as consumers' fears of COVID-19, said Jacob Vigdor, an economist and professor of public policy at the University of Washington.

"For the next several months, it's clear that many of the traditional things that people do to spend money -- go out to eat, go to the movies, go to sporting events, go to concerts or theatrical productions -- won't be viable," Vigdor said. "Even in states that have relaxed lockdowns much more rapidly, the reluctance of consumers to engage in their traditional habits has made it difficult for these businesses to break even."

Those challenges could lead to more layoffs in sectors that have seen relatively fewer losses from the pandemic. For example, claims last week for workers in management jobs were up 38% over the prior week, the ESD said.

For the next several months, the trajectory of the job market will be heavily influenced by the rate of COVID-19 cases, which have been rising nationally in recent weeks, as well as by prospects for a renewal of federal relief.

Another big unknown, economists say, is whether retailers and others will step up seasonal hiring ahead of the holidays.

On that score, job seekers in Washington got some good news.

On Thursday, Macy's announced a hiring event Oct. 22 for more than 600 holiday positions in Washington alone. Candidates are encouraged to submit applications online before the event.

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