First-time applications for unemployment benefits in the US fell to 709,000 last week, even as a rise in coronavirus cases threatens the gradual improvement in the labour market.
The decrease of 48,000 in weekly jobless claims came alongside a decline of 63,805 in claims for federal pandemic unemployment assistance, the labour department said on Thursday. Economists had expected claims of 735,000 in the week ending November 7, according to a Thomson Reuters survey.
While this marked a fresh low since the start of the pandemic in March, claims remain at historically high levels — above the peak of 665,000 reached during the financial crisis — underscoring the severity of the blow dealt by coronavirus to the labour market.
“Initial claims for regular and PUA benefits were lower than expected last week but remain stuck just above 1m and the risk may be for more lay-offs as coronavirus cases surge and some states impose restrictions on activity,” Nancy Vanden Houten, economist at Oxford Economics, said.
Overall, 21.16m Americans are still receiving jobless benefits of some kind eight months since the coronavirus crisis began in the US, according to data that are reported with a two-week lag.
The recent data highlight the fading effects of fiscal stimulus measures. While breakthrough on a Covid-19 vaccine has offered investors some hope, fears about the labour market have been reignited by the rapid rise in coronavirus cases — with the US single-day increase topping 144,270 on Wednesday — alongside a move by some states such as New York to reintroduce restrictions to curb fresh outbreaks.
“We think claims are more likely to rise than fall further across the remainder of the year,” said Ian Shepherdson, economist at Pantheon Macroeconomics. “Demand for discretionary services like restaurants, hotels and travel appears to be falling outright, and it’s not clear that strength in the goods economy will provide a complete offset.”
The figures outline the difficult task ahead for President-elect Joe Biden, who inherits an economy whose rebound is losing steam. Mr Biden wants Congress to reach a stimulus deal and hopes to boost the US recovery before he takes office in January.
Federal Reserve chair Jay Powell, who has repeatedly called for additional aid to bolster the economy, said at the November monetary policy meeting that he believed “we’ll have a stronger recovery if we can just get at least some more fiscal support”.
Talks between Nancy Pelosi, the Democratic speaker of the House, and Steven Mnuchin, US Treasury secretary, on a fresh stimulus deal of up to $2tn faltered in the run-up to the election. Despite Mr Biden’s desire for further stimulus, a larger fiscal package may not be possible if Republicans retain control of the Senate.
While the US unemployment rate fell to 6.9 per cent last month, down from a peak of 14.9 per cent in April, the pace of job creation has slowed and payrolls remain more than 10m below their pre-pandemic levels.
A separate report on Thursday showed consumer prices in October were unchanged month on month and up 1.2 per cent year on year, missing economist expectations. Gains in electricity prices, airfare and new cars were offset by a decline in petrol prices and medical care costs.
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So-called core consumer prices, which strip out the price of volatile items such as food and petrol, rose 1.6 per cent from a year ago.
Economists have said that inflation should pick up as consumer demand for goods and services rises, driven by the cash pile American households have accumulated from stimulus payments and reduced spending.
However, Thursday’s report showed that inflation remains subdued as the pandemic stretches on. The Fed has pledged to keep rates at ultra-low levels to support the economy until the US reaches full employment and substantially higher inflation.