The drop in people receiving unemployment benefits in the US could indicate rehiring, or it could be a sign of people being out of work for so long their benefits have run out

Washington (AFP) - New claims for US jobless benefits continued inching down last week, the Labor Department said Thursday, though at 860,000 the applications were higher than expected.

The United States saw a surge in workers filing new benefit claims amid the widespread business shutdowns in March to stop the spread of Covid-19, and though that wave is well past its peak, weekly filings remain at levels far above the worst of the 2008-2010 global financial crisis.

However, the latest data show the insured unemployment rate among people eligible for benefits fell 0.7 points to 8.6 percent in the week ended September 12, and the number of people claiming under the Pandemic Unemployment Assistance (PUA) program for those not normally eligible for benefits declined by more than 200,000.

But nearly 29.8 million people continued to receive some form of government aid through the week ended August 29, the latest for which data was available, the Labor Department said, and analysts have grown increasingly concerned of a spiraling employment crisis.

“While it is good the numbers are falling, their decline is tapering, so we have over a year to get to normal,” chief economist at the AFL-CIO trade union federation William Spriggs said on Twitter.

The data comes amid a continued impasse in Washington over additional support to the battered US economy and help for workers who have lost their jobs.

The $2.2 trillion CARES Act passed in March created the PUA and allowed people to receive benefits for an extended period, however the extra $600 per-week in extra unemployment payments as well as a program to support small businesses have expired.

Democratic House speaker Nancy Pelosi announced earlier in the week a renewed push to reach an agreement with President Donald Trump, who has balked at calls to ramp up support to struggling state and local governments.

“Failure on the part of policymakers to enact another fiscal relief package poses significant downside risks to the economy and labor market as the recovery appears to be losing momentum,” said Nancy Vanden Houten of Oxford Economics.

The US is home to the world’s worst coronavirus outbreak but has shown signs of recovering from the economic hit caused by the lockdowns. The unemployment rate skyrocketed to 14.7 percent in April but it has since dialed back to 8.4 percent.

Rubeela Farooqi of High Frequency Economics warned the decline in the insured unemployment rate could reflect people either being rehired, or exhausting their benefits.

“The risk going forward continues to come from virus outbreaks and intermittent interruptions to activity,” she wrote in an analysis. “Overall, the labor market is less weak compared to April but remains at risk of permanent damage from repeated closures.”