The number of Americans filing new claims for unemployment benefits unexpectedly increased last week, supporting views the economic recovery from the COVID-19 pandemic was running out of steam amid diminishing government funding.

Initial claims for state unemployment benefits totaled a seasonally adjusted 870,000 for the week ending Sept. 19, compared to 866,000 in the prior week, the Labor Department said on Thursday. Economists polled by Reuters had forecast 840,000 applications in the latest week.

Claims are above their 665,000 peak during the 2007-09 Great Recession, though applications have dropped from a record 6.867 million at the end of March. While the reopening of businesses in May boosted activity, demand in the services industries has remained lackluster, keeping layoffs elevated.

Job cuts have also spread to industries such as financial services and technology that were not initially impacted by the mandated business closures in mid-March because of insufficient demand.

Federal Reserve Chair Jerome Powell told lawmakers on Wednesday that Congress and the U.S. central bank needed to "stay with it" in working to support the economy's recovery. In addition to cutting interest rates to near zero and vowing to keep borrowing costs low for a while, the Fed has also been pumping money into the economy.

Government money to help businesses has virtually dried up. Tens of thousands of airline workers are facing layoffs or furloughs next month unless the White House and Congress provide another rescue package.

A $600 weekly unemployment benefits supplement ended in July and was replaced with a $300 weekly subsidy, whose funding is already running out. New coronavirus cases have been rising recently and the death toll in the country topped 200,000 on Tuesday – by far the highest number of any nation.

The ebbing fiscal stimulus and persistent coronavirus infections are already restraining the economy after activity rebounded sharply over the summer. Retail sales and production at factories moderated in August. Business activity cooled in September, reports have shown.