Washington (AFP) - A drop in new applications for US unemployment benefits reported Thursday offered small comfort to the millions of Americans who will see pandemic aid expire without an agreement in Congress on a new relief program.

With just weeks left before President-elect Joe Biden takes office, Republicans and Democrats remain at odds over what should be included in a new spending package to help businesses and families struggling from the damage inflicted by Covid-19.

New US jobless claims fell to 712,000 last week, a better-than-expected decline of 75,000, seasonally-adjusted, the Labor Department reported Thursday.

Economists had been anticipating the number of new claims to hold steady after spiking in the week ended November 21 to an upwardly revised 787,000.

Combined with Pandemic Unemployment Assistance -- which goes to people who normally would not qualify for benefits -- there were still more than a million new claims for some form of benefit last week.

The report showed that through the week ended November 14, 20.2 million people continued to receive some form of unemployment benefit, including through the special pandemic programs that will terminate at the end of the year.

The fate of those programs remains uncertain as Congress has yet to break the impasse over a new federal relief plan that can be approved in the "lame duck" session before Biden takes charge of the White House.

Congress keeps talking

Democratic leaders in Congress have thrown their support behind a $908 billion bipartisan proposal, at least as a starting point for discussions, and Biden too said it would be a good first step.

"That would be a good start. It's not enough," Biden said in a joint CNN interview with Vice President-elect Kamala Harris, adding that he would pursue further aid after he takes office on January 20.

"People are really hurting. They're scared to death."

But Republican Senate Majority Leader Mitch McConnell continues to press for a much more limited plan of about $500 billion that repurposes unspent funds from the $2.2 trillion CARES Act approved in March.

McConnell on Thursday urged lawmakers to support his plan.

"Compromise is within reach," he said on the Senate floor, describing his proposal as "serious and highly targeted relief" that contains "elements which we know the president is ready and willing to sign into law."

"Why should these impactful and non-controversial life-preservers be delayed one second longer?" McConnell said.

Double-dip recession

Asked about McConnell's proposal, President Donald Trump indicated he would support it.

"I want it to happen. And I believe we are getting very close to a deal," Trump told reporters.

But top Senate Democrat Chuck Schumer pushed back, saying McConnell's stance is "take it or leave it." He called for "good faith" talks and stressed the urgency as the economy falters.

"Many family budgets and small businesses are at their breaking point," Schumer said, noting that economists have warned of a double-dip recession where growth falters again after an apparent recovery.

Biden's Treasury secretary nominee Janet Yellen on Wednesday called the crisis "an American tragedy."

US employment spiked during the pandemic to nearly 15 percent, but in October had recovered to 6.9 percent. However there have been growing signs the labor market recovery has stalled as surging Covid-19 cases prompt more business restrictions.

The Labor Department will release its November employment report Friday, with analysts expecting the unemployment rate to hold steady as the economy adds 650,000 jobs, about the same as the prior two months.

Will it last?

Economists warn the big drop in last week's jobless claims could be a blip since the data are for the week that includes the Thanksgiving holiday, which could skew the figures.

"The plunge in initial claims does not refute the idea that the trend is rising," said Ian Shepherdson of Pantheon Macroeconomics. 

He warned that "initial claims likely will rebound strongly next week, probably rising above the 800,000 mark for the first time in eight weeks."

Rubeela Farooqi, chief US economist at High Frequency Economics, highlighted the danger posed by the potential for rising layoffs in coming weeks.

"The hit to household balance sheets from job and income loss as well as expiring federal benefits is a downside risk for spending going forward."