A restaurant in Richardson, Texas, seeking workers in September.

Photo: LM Otero/Associated Press

New applications for unemployment assistance fell during a holiday week clouded with uncertainty around impending changes to benefit payments.

Weekly initial claims for jobless benefits from regular state programs, a proxy for layoffs, declined by 19,000 to a seasonally adjusted 787,000 in the week ended Dec. 26, the Labor Department said Thursday. That marked a second consecutive decline from the three-month high recorded earlier in December, when virus cases were surging and more jurisdictions were bringing back economic restrictions to control the spread of the coronavirus.

Last week’s level remains higher than any recorded before this year, although it is down sharply from a peak of nearly 7 million in late March.

Early last week, Congress passed a $900 billion Covid-19 relief bill to, in part, add $300-a-week supplement for those receiving unemployment benefits and extend two pandemic-specific programs used by about 14 million people. But then President Trump said he was displeased with the bill, casting doubt over whether he’d sign it into law. He ultimately did sign the measure on Dec. 27.

The higher payments promised in the bill could have motivated some Americans to seek benefits last week, but the lack of clarity about if the bill would become law may have persuaded some would-be applicants to wait. Unemployed workers are not required to file the week they’re laid off and not all applications are approved.

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In addition to the uncertainty around the relief bill, weekly jobless claims figures can be volatile during holiday periods because of challenges with seasonal adjustment. A four-week moving average of initial jobless claims, which smooths out weekly variation, ticked higher in recent weeks, a sign of a loss of momentum in the labor market recovery.

Other data suggests the broader economic recovery may be slowing. Household spending declined 0.4% in November, its first retreat in seven months, and household income fell 1.1%, according to the Commerce Department. New and existing-home sales fell in November from the previous month.

Many economists think growth slowed in the final months of 2020 but anticipate a pickup in the economic recovery next year, as vaccines are distributed more widely and many households receive a second round of stimulus checks through the Covid-19 relief bill.

But the relief bill won’t be enough to keep some businesses and households afloat over the coming months, said Belinda Román, an economist who teaches economics at St. Mary’s University in San Antonio. The surge in recorded Covid-19 cases in many parts of the U.S. through the fall, coupled with the discovery of a new variant of the disease that appears to be more contagious, suggest this winter “is going to be more severe than what we thought,” she said.

Additional aid for small businesses, which was included in the relief bill, “is more like a Band-Aid,” Ms. Román said. “Maybe they’re able to apply for some money to pay some bills, but the more significant long-term damage is done.”

The new stimulus law increases unemployment assistance in every state by $300 a week through March 14 and extends two federal pandemic programs that otherwise would have paid out their final benefits in December.

One, called Pandemic Unemployment Assistance, provides benefits for the self-employed and others not normally eligible for jobless aid, while the other, Pandemic Emergency Unemployment Compensation, offers up to 13 weeks of additional payments for individuals who exhausted their regular state benefits. Both were extended until mid-March.

Many people continue to experience lengthy periods of unemployment. Continuing claims, a proxy for the number of people collecting unemployment benefits through regular state programs, held above five million in mid-December, according to the Labor Department. While that is down from a peak of 25.9 million in May, it is still about three times the pre-pandemic level.

An online survey conducted by the Harris Poll on behalf of staffing firm Express Employment Professionals found that 65% of jobless adults are getting more discouraged the longer they are out of work. On average, unemployed adults in the survey applied to 11 jobs over the prior month, but had only one interview, according to the survey taken during the second half of October and released in December.

John Trader said he moved into his younger brother’s home in Atlanta after losing his marketing job in July. He said he sent out hundreds of resumes and had interviews with about 10 companies before he got an offer on Dec. 18 with a software-development company.

The position doesn’t pay as well, but the 50-year-old Mr. Trader said he feels fortunate to be getting back to work.

“I can’t even describe how frustrating it has been,” Mr. Trader said of his job search. In one case, he said he participated in four interviews and spent 30 hours preparing a project to show a potential employer the kind of work he could do. He interviewed six times for another position only to be told the company had ultimately decided not to hire anyone.

The labor market recovery since the spring has been uneven across industries. Restaurants and retail stores in malls are down sharply from where they were last year, while others have grown beyond their pre-pandemic levels.

Mike Stanziola, senior vice president of IT operations for firstPRO Inc., a staffing agency in Philadelphia, said December marked his division’s best month this year, as more companies sought information-technology professionals for projects they previously had delayed because of the pandemic.

“Some folks are still hesitant to hire full time, but the work is backing up so they’re onboarding them as contractors,” Mr. Stanziola said. Confidence in full-time hiring is also beginning to grow, he said, but it remains a challenge to recruit tech professionals because job losses in that sector haven’t been as severe.

The coronavirus pandemic has forced many Americans to accept new financial realities. WSJ’s Shelby Holliday traveled to a diverse neighborhood in Philadelphia to learn how neighbors are facing different struggles brought on by the same virus. Photo: Adam Falk/The Wall Street Journal

Write to Kim Mackrael at [email protected]

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This post first appeared on wsj.com

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