U.S. Recovery More Tenuous as Jobless Claims Rise, Incomes Fall
(Bloomberg) -- Applications for U.S. state unemployment benefits unexpectedly posted the first back-to-back weekly increase since July, while Americans’ incomes and savings fell last month.
Wednesday’s data indicate the economic rebound is becoming more tenuous amid soaring coronavirus cases, fresh lockdowns and an extended deadlock in Congress over a new stimulus package.
Initial jobless claims in regular state programs increased by 30,000 to 778,000 in the week ended Nov. 21, according to Labor Department data. Without adjustments for seasonal fluctuations, the figure rose by about 78,000 during the week.
A separate Commerce Department report showed U.S. household spending rose in October but incomes dropped by more than forecast, owing in large part to a decline in government supplemental jobless benefits. The savings rate fell for a sixth month.
Continuing claims -- the total pool of Americans on ongoing state unemployment benefits -- fell by 299,000 to 6.07 million in the week ended Nov. 14. But the number of Americans on an extended assistance program continued to increase, a sign that more people have exhausted regular state benefits.
The consecutive rise in weekly claims shows that the resurgent coronavirus threatens to stall an economic rebound that was already moderating from a breakneck pace in the third quarter. Some economists predict a contraction in gross domestic product the first three months of 2021.
The job market faces additional hurdles as states and cities restrict business activity and hospitalizations spike.
“The continued weakness of the labor market is something that is going to drive the whole economy down,” Catherine Mann, global chief economist at Citigroup Inc., said on Bloomberg Television. At the same time, solid sectors like manufacturing are “going to keep us from being in official recession, but it’s going to be very grim,” she said.
What Bloomberg’s Economists Say...
“If claims continue to move higher in the coming weeks, the chances of the U.S. economy tipping back into a contraction will intensify.”
-- Eliza Winger, associate
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Several states recorded significant increases in initial claims, led by Illinois -- where Chicago issued a stay-at-home advisory starting last week. Michigan, Washington, New Mexico, California and Minnesota also reported higher filings.
U.S. stocks edged lower along with 10-year Treasury yields, while the dollar fluctuated.
Continuing claims for Pandemic Unemployment Assistance, which provides benefits to self-employed and gig workers, increased by about 466,000 to 9.15 million. The Pandemic Emergency Unemployment Compensation, which provides payments to the long-term unemployed, was used by 4.51 million Americans. Those two programs will expire at year-end, leaving many without government aid.
In other economic data released Wednesday:
- U.S. durable goods orders increased at a faster-than-expected clip in October, helped by demand for computers and metals, underscoring a manufacturing sector that continues to support the economy.
- New-home sales in the U.S. remained brisk in October, staying near the best pace since 2006 and well above pre-pandemic levels, the latest sign that record-low mortgage rates are underpinning robust buyer interest.
- The economy expanded at a record 33.1% annualized pace in the third quarter, unrevised from the initial reading.
- The U.S. merchandise-trade deficit widened in October as imports reached the highest in more than a year, outpacing a gain in the value of exports.
- The University of Michigan’s final November reading of consumer sentiment was little changed from the preliminary figure. At 76.9, confidence is the weakest in three months and coincides with the pickup in infection rates.
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