Slowing US Labor Market, Rising COVID-19 Cases Clouds Economic Recovery


WASHINGTON (Reuters) – The number of Americans claiming unemployment benefits for the first time continued to rise last week, suggesting new COVID-19 infections and the explosion of business restrictions are helping layoffs and undermining the labor market recovery.

FILE PHOTO: People line up in front of the Kentucky Career Center before it opens to help with their unemployment needs in Frankfort, Kentucky, USA, June 18, 2020.

Nevertheless, the economy started steadily in the fourth quarter, with consumer spending and business investment in equipment in October exceeding analysts ’expectations. Businesses also reported a sharp drop in profits in the third quarter.

But that’s probably not enough to build up the economic cloud. Personal income fell last month and could fall further, with at least 12 million Americans losing government-funded unemployment benefits a day after Christmas.

The benefits, which are part of a more than $ 3 trillion government corona virus clearance package that has largely expired, contributed to a record economic growth in the third quarter. Another package is expected only after President-elect Joe Biden takes the oath on Jan. 20, with President Donald Trump placing great emphasis on challenging his election loss against Biden.

“There’s a two-tier recovery from the pandemic recession, where the top of society continues to spend as usual, while the lower half of the country sits in long lines at food banks, with few job opportunities,” Chris said. Rupkey, chief economist at MUFG New York.

First claims for state unemployment benefits rose by 30,000 to a seasonally adjusted 778,000 for the week ended Nov. 21, the Department of Labor said. This was the second week of direct growth in claims and exceeded economists ’expectations for 730,000 applications in a Reuters survey.

The weekly damage report, the most up-to-date data on the health of the farm, was published a day earlier due to Thursday’s Thanksgiving Day holiday.

Unadjusted receivables jumped from 78,372 to 827,710 last week. Economists prefer the unadjusted figure because it has previously encountered difficulties in adjusting injury data to seasonal fluctuations due to the economic shock caused by the pandemic.

Including a government-funded program for the self-employed, concertmakers, and others who are not eligible for regular state unemployment programs, 1.14 million people filed claims last week. At least 20.5 million people collected unemployment benefits in early November.

The United States has been hit by another wave of coronavirus infections, with more than 100,000 daily cases since early November. According to official Reuters data, more than 12 million people have been infected in the country.

More than 259,000 Americans have been killed by respiratory illnesses, and hospitalizations are on the rise, prompting the state and local governments to redefine the multitude of social and economic life constraints that have plagued 2007-2009. may remain above the peak of 665,000 experienced during the recession. .

Stocks on Wall Street were mostly lower. The dollar fell against a basket of currencies. U.S. Treasury prices have risen.

EXCELLENT BENEFITS

Although the claim report showed that the number of recipients of benefits fell from 299,000 after the first week to 6,071 million in the week ending 14 November, this was due to the fact that many had exhausted their entitlement, which in six states is limited.

A record 4.509 million workers submitted extended unemployment benefits in the week ending November 7, up 132,437 from the previous week. These, as well as benefits for concert workers and self-employed people, will end on December 26th.

This and the decline in consumer confidence amid the raging pandemic call into question the sustainability of the strong spending pace. In a second report, the Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.5% last month, after rising 1.2% in September. But personal income fell 0.7%, reversing 0.7% growth in September. Economists expected a 0.4% increase in consumer spending.

“Without recent virus developments, GDP would appear to be moving in a good strong fourth quarter,” said Daniel Silver, an economist at JPMorgan in New York. “But due to the recent surge in new COVID-19 cases, we believe the data will soften noticeably in November and December.”

The expected slowdown in consumer spending is likely to be somewhat dampened by solid business investment amid robust profits, ensuring continued economic growth in the fourth quarter, albeit at a moderate pace.

Orders for non-defense capital goods, with the exception of aircraft – closely monitored business spending plans rose 0.7% in October, the Department of Commerce said in a third report.

The division’s fourth report showed that after-tax profit, excluding inventory valuation and capital consumption adjustments, which are consistent with S&P 500 profits, rebounded at an annual rate of 36.6% in the third quarter after two straight quarterly declines.

The department also confirmed that the economy grew at a historic rate of 33.1% in the July-September quarter.

Growth estimates for the fourth quarter are below the 5% annual level. The slower growth was underlined by the Fifth Department of Commerce’s report, which said the trade deficit in goods rose 1.2% to $ 80.3 billion in October.

Despite encouraging developments in vaccinations, spiritual COVID-19 infections and expectations for a smaller stimulus package have led economists to sharply worsen their GDP projections for the first quarter of 2021.

Report: Lucia Mutikani; Edited by Chizu Nomiyama and Andrea Ricci