Jobless claims in the first full week of January spiked to a seasonally adjusted 965,000, a 23 percent increase from the previous week, and the highest weekly amount since August.
The increase in jobless claims follows a December jobs report that showed the economy shedding jobs, putting the recovery of the labor market in reverse.
Economists had expected 800,000 new unemployment claims last week.
“This is bad news for the economy heading into 2021,” said Cailin Birch, global economist at The Economist Intelligence Unit.
“The fact that benefits claims are increasing suggests that the economy may lose jobs again in January, as the number of coronavirus cases continues to surge, weighing heavily on businesses.”
Birch projected that the unemployment rate, which remained steady at 6.7 percent in December, would not drop below 6 percent in 2021.
Bankrate senior economic analyst Mark Hamrick called the increase in new claims “shocking,” and also linked it to the slow progress in fighting the pandemic.