Fresh restrictions in many states as Covid-19 cases jump has pushed up benefit claims for the first time since early March
The number of US workers losing their jobs has risen for the first time since March as hopes of a swift recovery dwindle in the face of surging coronavirus cases.
There were 1.42m initial claims for benefits last week, up 109,000 from a week earlier and seven times more than a year ago.
A raft of states including California have been forced to reimpose restrictions on daily life after a resurgence of the virus, which has now claimed more than 140,000 lives in the US.
The brutal jobs numbers follow a change in tone this week from President Donald Trump - who is facing an election in November and trailing in the polls - as he said the pandemic would "get worse before it gets better" and urged Americans to wear masks.
US companies added 4.8m jobs in June in what has been hailed as a remarkable turnaround since the crisis struck, but the number of unemployed people is still 12m above pre-pandemic levels and the jobless rate has surged to 11.1pc.
Oxford Economics economist Nancy Vanden Houte said the US jobs market is in a precarious state. She said: "Job losses in the July employment report are possible."
In total 31.8m Americans on benefits - almost one in 10 of the entire population - have had incomes topped up by $600 a week to cushion the jobs shock.
But the extra funding is due to expire at the end of this week and James Knightley, US economist at ING, said the world's biggest economy faces a darkening picture.
He warned that four unemployed people are chasing every vacancy, and added: "Incomes will be falling significantly for those 32m people when job opportunities are increasingly scarce due to renewed Covid lockdowns".
The US shunned a UK-style jobs furlough scheme in favour of a massive unemployment benefit top-up, but Republicans have argued that the generosity of the scheme has deterred some from returning to work.
Research shows around two-thirds of workers are getting benefits worth more than their previous salary - a fifth are getting double their previous income. Congress is negotiating another aid package that could extend the $600 benefit, but at a lower level.
- Telegraph Media Group