First-time applications for unemployment benefits rose to 778,000 last week, the latest worrying sign of waning momentum in the US labour market as it grapples with a new wave of coronavirus cases and fading fiscal support.
The increase of 30,000 in weekly jobless claims — the first back-to-back weeks of rises since July — came alongside a slight decrease in claims for federal pandemic unemployment assistance, a separate programme for workers not eligible for regular state benefits, the labour department said on Wednesday.
Overall, nearly 1.1m Americans sought jobless claims for the first time last week, and about 20.5m are receiving unemployment benefits of some kind, more than eight months since the coronavirus crisis began in the US.
“Encouraging vaccine news bodes well for economic activity from mid-2021 onward, but the expiry of policy safety nets at the end of 2020 means the near-term outlook will be bleak for many heading into the holiday season,” Nancy Vanden Houten, an economist at Oxford Economics, wrote in a note.
The discouraging data come as negotiations are at a standstill on possible new stimulus for the US economy, with no signs of serious talks between the outgoing Trump administration, Republicans who hold the majority in the US Senate and Democrats who control the House of Representatives.
Joe Biden, the US president-elect, has called for quick action to reach a deal even before he takes office in January, but his appeals have yielded little movement.
The flurry of economic data released on Wednesday morning present a mixed picture of how the US economy has fared since the initial pandemic shock earlier this year, as coronavirus cases increase at a record pace with the onset of cooler weather.
A report on Wednesday showed personal incomes fell 0.7 per cent in October from the previous month, reflecting a decrease in Lost Wages Supplemental Payments, a stop-gap programme authorised by US president Donald Trump providing wage assistance to people affected by Covid-19.
Despite this, spending rose for the sixth straight month, up 0.5 per cent, although the data suggested the consumer’s ability to bolster the economy was fading, with the reimposition of restrictions amid growing coronavirus cases threatening to further slow momentum.
A gauge of consumer sentiment produced by the University of Michigan also weakened in November as Americans became less optimistic about the near-term outlook in the face of the virus’s resurgence, outweighing positive news on the vaccine front. The figure was also affected by partisan shifts following the presidential election.
The US Census Bureau confirmed that the economy rebounded at an annualised pace of 33.1 per cent in the third quarter — 7.4 per cent compared with the previous quarter — as it bounced back from a huge slump at the start of the pandemic.
But economists are concerned that the pace of growth in the US slowed dramatically in the fourth quarter and output will struggle to get back to pre-pandemic levels.
The US merchandise trade deficit — which Mr Trump had vowed to slash during his four years in office — widened to $80.3bn in October, from $79.4bn in September, roughly in line with expectations.
Orders for long-lasting goods rose 1.3 per cent in October — higher than the 0.9 per cent increase that had been expected. Orders have increased for six consecutive months, with the manufacturing sector continuing to recover from the coronavirus lockdowns, albeit at a slower pace than before.
New orders for non-defence capital goods excluding aircraft, considered a proxy for business investment, rose 0.7 per cent, ahead of expectations, following a 1.9 per cent increase the previous month.
Meanwhile, sales of newly built single-family homes slipped 0.3 per cent to an annual rate of 999,000 in October, exceeding estimates. Low mortgage rates and a suburban shift fuelled by remote working continue to support the housing market, which has been one of the US economy’s bright spots.
Still, economists have cautioned the near-term economic outlook will depend on the trajectory of coronavirus infection and death rates. US health officials have warned the Thanksgiving holiday this week could become an accelerator event.
“When you look at the risk of the virus in the near term, you can’t dismiss the possibility that growth could slow or even that we could have a double-dip recession,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “But the vaccine presents a very bright light at the end of the tunnel, and if we do see a double dip, it won’t be very lengthy.”