The number of Americans filing claims for the first time for unexpected unemployment benefits fell last week, although rates remain high as more businesses face it. restrictions and users hunting down amid an increase in new COVID-19 cases.
The coronavirus crisis is also taxing consumer spending in the United States, which fell last month for the first time since April.
Initial claims for state unemployment benefits totaled 803,000 seasonally adjusted for the week ending Dec. 19, compared with 892,000 in the previous week, the U.S. Department of Labor said Wednesday. Economists surveyed by Reuters had forecast 885,000 claims in the most recent week.
While jobless claims have fallen from a high of 6.867 million in March, they are still above their 665,000 peak during the Great Depression of 2007-20009.
The weekly report on unemployment claims, the fastest data on the health of the economy, was published an early day as government offices are closed on Christmas Eve. It was consistent with other recent weak economic reports, including a decline in consumer confidence to a four-month high in December.
The recovery from the pandemic recession is also failing due to delays by Congress in approving another rescue package.
More than $ 3 trillion in government pandemic relief provided historic growth in the third quarter. Congress on Monday approved an additional fiscal stimulus worth nearly $ 900bn, but economists said it was too little, too late.
The U.S. is being hit by a new wave of coronavirus cases, with more than 18 million people infected and nearly 320,000 dead, according to Reuters news agency of official data.
State and local governments have reinstated restrictions on businesses, eliminated consumer spending and spread a new round of layoffs.
A second report from the Commerce Department on Wednesday showed consumer spending, which accounts for more than two-thirds of U.S. economic activity, declined 0.4 percent in November after rising 0.3 percent in October. It was the first decline in consumer spending since the recovery began in May.
Economists had forecast consumer spending to fall 0.2 percent in November. The economy went into recession in February.
The weak data strengthens economists ’expectations for slow economic growth in the fourth quarter and a possible shortfall in yield in the first three months of 2021, despite the stimulus and two vaccines to fight COVID-19 to spread.
While the new rescue package includes direct payments to most Americans, economists expect a chunk of the stimulus checks to be saved. Health experts also warn that it could take a while for herd immunity.
“The jury is finding out if consumers are spending the money they are getting,” said Chris Rupkey, chief economist at MUFG in New York. “It looks like many of the initial economic impact payments have been saved. ”
The incentive package also includes an extension of weekly unemployment subsidy for a further 11 weeks and will extend a small business loan program and direct money to schools, airlines, mobility systems, and vaccine circulation.
Gross domestic product reconnected at an annualized high of 33.4 percent in the third quarter after contracting at a rate of 31.4 percent in the April-June period, the deepest rate since the government began holding records in 1947.
Growth forecasts for the fourth quarter are well below the 5 percent annual rate. Economists expect little or even shortening growth in the first quarter of 2021.
“Threats to the outlook are largely negative,” said Dante DeAntonio, senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Increased spread of the virus across much of the country could lead to greater activity than expected.”