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Around 860,000 people filed for first-time jobless benefits last week

The stalemate in Washington over coronavirus relief will "make it far harder in coming months to claw back the jobs lost during the pandemic," said one economist.

Another 860,000 people filed for first-time unemployment benefits last week, a slight decline from the previous week, amid a sluggish recovery in the labor market.

The number of continuing claims, which represents people filing for ongoing benefits, fell by almost 1 million, to 12.6 million, according to new weekly data from the Labor Department.

"Economic hardship continues to occur on a massive scale, because coronavirus remains uncurbed," said AnnElizabeth Konkel, an economist at Indeed Hiring Lab. "Overall, a fuller labor market recovery appears to have stalled out. Covid case clusters continue to pop up, and businesses continue to close doors, affecting the livelihood of millions. Until this cycle is broken, a complete economic recovery remains out of reach."

Full coverage of the coronavirus outbreak

The nation's unemployment rate has fallen steadily since it hit record levels in the spring, but with jobless claims still at five times their pre-pandemic levels, the Federal Reserve has shifted its focus. The central bank will consider raising its benchmark interest rate only once the U.S. hits maximum employment, which Fed Chairman Jerome Powell said Wednesday was "a long way" ahead.

"We would like to get back to a strong labor market where wages are moving up, where people can find work, where labor force participation is holding up nicely," Powell said at a news conference after the Fed's monetary policymaking meeting.

In the meantime, Congress remains deadlocked over new relief measures, and the $600 a week in additional unemployment assistance expired in July. Millions of Americans face eviction, food pantries are responding to record levels of need, and some laid-off workers are finding they have to wait weeks or even months to receive their unemployment benefits.

In addition to providing vital financial support to unemployed workers and their families, the extra $600 was the source of ongoing consumer spending, which drives the U.S. economy and leads to job growth.

"This drop in benefits will make it far harder in coming months to claw back the jobs lost during the pandemic," Elise Gould, senior economist at the Economic Policy Institute, wrote in a note.

While Democrats and Republicans continue to debate the finer details of the next round of emergency coronavirus aid, Powell offered more clarity.

"My sense is that more fiscal support is likely to be needed," he said.