Easing coronavirus lockdowns tied to the rapid rollout of Covid vaccinations in the US has helped spark a sharp increase in American consumer spending and the lowest new jobless claims since the start of the pandemic.
US retail sales in March rose by the most in 10 months while the number of Americans filing for new unemployment benefits fell to fell by 193,000 in the week ending April 10 to 576,000, according to data published on Thursday. That beat economists’ expectations for 700,000 new claims.
Retail sales grew a seasonally adjusted 9.8 per cent in March compared to the previous month, the US Census Bureau reported, a stronger rise than the 5.9 per cent increase that economists expected. That spending was bolstered by the arrival of a fresh round of federal stimulus cash.
Sales had been dragged down 2.7 per cent in February, knocked by a severe bout of winter weather across the US and the fading impact of payments sent to Americans in an earlier round of stimulus.
New stimulus cheques began flowing to Americans around the middle of March, after President Joe Biden signed a $1.9tn spending plan that included payments of up to $1,400 per person and extended federal unemployment aid.
The jump in retail sales last month was the second-biggest rise on record, behind the 18.3 per cent rise in May 2020 as strict stay-at-home orders were eased in many parts of the US.
A separate weekly report from the US labour department showed the drop in new jobless claims for regular state unemployment programmes was led by California and Virginia, which saw decreases of 75,645 and 23,119 respectively.
The report revealed a drop of 20,444 in claims for federal pandemic unemployment assistance — which provides benefits for the self-employed and gig workers — to 131,975.
Hiring has picked up substantially as the vaccine rollout has spread nationwide, with the labour market adding 916,000 jobs in March and regional business surveys signalling stronger jobs growth. Still, the number of long-term unemployed — those without a job for six months or more — remains stubbornly high.
Economists are optimistic on the outlook for the US labour market and recovery more broadly, as vaccinations are distributed more wisely and massive stimulus is deployed. Despite the recent progress, however, nearly 17m Americans continue to seek jobless benefits more than a year after the pandemic began.
Adding to the upbeat picture of the US economy were two better-than-expected regional manufacturing surveys from regional Fed banks in New York and Philadelphia.
“Upbeat goods demand, buoyant business investment, and fiscal stimulus will keep manufacturing activity buoyant,” said Oren Klachkin, economist at Oxford Economics. “Dynamics will shift as reopenings quell consumer goods demand, but rising capital expenditures and momentous fiscal stimulus will keep factory gears churning quickly.”
Following the data, the yield on the US 10-year Treasury dropped 0.046 percentage points to 1.59 per cent, while S&P 500 stock futures were up 0.6 per cent.