The number of Americans filing first-time claims for unemployment benefits increased more than expected last week as mounting new Covid-19 infections caused more business restrictions.
The figures are further evidence that the pandemic and lack of additional fiscal stimulus were hurting the US economy.
Initial claims for state unemployment benefits totalled a seasonally adjusted 853,000 for the week ended December 5, compared to 716,000 in the previous week, the Labor Department said today.
Economists polled by Reuters had forecast 725,000 applications in the latest week.
The US is in the throes of a fresh wave of coronavirus infections, with the number of confirmed cases crossing the 15 million mark on Tuesday.
New strict stay-at-home orders went into effect in California earlier this week, affecting about three-quarters of the nearly 40 million people in the nation's most-populous state.
Other states and local governments have also imposed restrictions on businesses, which economists expect to lead to a fresh round of layoffs during winter, especially without additional pandemic relief money from the government.
A deal on another rescue package remained elusive this week, with Senate Majority Leader Mitch McConnell saying Congress was still looking for a way forward.
More than $3 trillion in government pandemic relief helped millions of unemployed Americans cover daily expenses and companies keep workers on payrolls.
The fiscal stimulus has almost dried up.
Though a government watchdog found the claims data is inaccurate because of people filing multiple claims, processing backlogs and fraud, it is broadly in line with other labour market data that have suggested a slowing in the recovery after a burst of hiring during summer.
Jobless claims hit a record 6.867 million in March. They have been stuck above their 665,000 peak during the 2007-09 Great Recession.
The government reported last week that the economy created 245,000 jobs in November, the smallest gain in non-farm payrolls since the jobs recovery started in May and the fifth straight monthly slowdown in employment growth.
Only 12.4 million of the 22.2 million jobs lost in March and April have been recovered.
Labour market distress is keeping inflation muted. In a separate report today, the Labor Department said its consumer price index rose 0.2% in November after being unchanged in October.
In the 12 months to November, CPI increased 1.2% after a similar gain in October.
Economists polled by Reuters had forecast the CPI edging up 0.1% in November and rising 1.1% year-on-year.