It’s beginning to look a lot like … Easter, at least on the economic front. After several months of faster-than-expected recovery to the COVID-19 crater in the jobs market, red lights are again flashing that another crater might be ahead. As support programs run out of cash and Congress remains stalled, weekly initial jobless claims rose again, and again more than expected:
In the week ending November 21, the advance figure for seasonally adjusted initial claims was 778,000, an increase of 30,000 from the previous week’s revised level. The previous week’s level was revised up by 6,000 from 742,000 to 748,000. The 4-week moving average was 748,500, an increase of 5,000 from the previous week’s revised average. The previous week’s average was revised up by 1,500 from 742,000 to 743,500. The advance seasonally adjusted insured unemployment rate was 4.1 percent for the week ending November 14, a decrease of 0.2 percentage point from the previous week’s unrevised rate.
The advance number for seasonally adjusted insured unemployment during the week ending November 14 was 6,071,000, a decrease of 299,000 from the previous week’s revised level. The previous week’s level was revised down by 2,000 from 6,372,000 to 6,370,000. The 4-week moving average was 6,615,250, a decrease of 438,000 from the previous week’s revised average. The previous week’s average was revised down by 1,250 from 7,054,500 to 7,053,250.
The continued decrease of those receiving paid benefits might still be good news, but it also might just be that some are no longer eligible to receive them. State programs are nearing their limits after several months of eligibility, and that means we will soon have more workers sidelined with less access to support. That is a very big problem, both socially and economically, in an economy built on consumer spending.
CNBC’s Jeff Cox notes that this was a miss on expectations as well. Those expectations are about to get a lot more sour too, thanks to the new restrictions being put on commerce, especially in the leisure and hospitality sector:
The pace of first-time filings for jobless claims picked up last week, with the jobs market showing increasing vulnerability to the coronavirus spread.
Claims totaled 778,000 for the week ended Nov. 21, ahead of the 733,000 expectation from economists surveyed by Dow Jones and up from 742,000 the previous week. …
The hospitality industry has been particularly hard-hit with restrictions on capacity and the likelihood that many will have to go back to take-out only operations or close completely as winter settles in and cases continue to increase.
This comes out at the same time as the BEA’s second estimate of Qe growth, which remains unchanged at its annualized 33.1% pace. It’s been a long time since September 30, however, in both employment and the COVID-19 business climate. Governors are trying to step carefully (if somewhat hypocritically) in order to avoid the full lockdowns of March and early April that vaporized 20 million-plus jobs, but this is putting pressure on them to do more:
US coronavirus data for Tuesday, Nov. 24, according to @NBCNews count:
• Cases: 173,429
• Deaths: 1,925
US has averaged 173,766 cases/day over the last 7 days, up from an average 87,340 cases/day 4 weeks ago.
— NBC News (@NBCNews) November 25, 2020
The need for another backstop to deal with government-imposed business restrictions grows more obvious by the day. Unfortunately, the same cannot be said for Congress’ efforts to address it. It’s not as if they don’t recognize the urgency, but no one wants to move off their July positions to get it done. It’s the rare moment in which Donald Trump remains the voice of reason and compromise:
“This is not and should not be a partisan issue,” Rep. Dwight Evans (D-Pa.) said.
Lawmakers from both parties say it would be a tremendous failure if Congress cannot pass the next COIVD-19 relief bill by Christmas.
“Another COVID-19 relief package is absolutely critical,” Rep. Rob Wittman (R-Va.) said.
“We must fix this problem and we must put a relief package together now,” Evans said.
Evans says the next COVID-19 relief bill should focus on stimulus, as well as aid for small businesses, schools and first responders. But Wittman and Pennsylvania Congressman Mike Kelly (R-Pa.) want a more targeted and narrow bill than Democrats have proposed.
On Friday, there did seem to be glimmers of movement:
Speaker Nancy Pelosi, Senate Minority Leader Charles E. Schumer and President-elect Joe Biden were meeting in Wilmington, Del., later Friday to talk about their agenda. Publicly, their position has been that Republicans ought to drop their opposition to a $2 trillion-plus aid bill in the lame-duck session.
But with pressure coming from all sides, even some top Democrats admit a smaller Band-Aid that could tide over lawmakers until after Biden takes office Jan. 20 would be better than nothing.
“I just hope that we can get agreement. It may not be everything that everybody wants but at least if we can get some significant relief to people,” House Majority Leader Steny H. Hoyer, D-Md., told CQ Roll Call on Friday. “And then we’re going to be here next year. If we need to do other things, we’ll do other things.”
The biggest issue is re-funding the payroll support programs. The Paycheck Protection Program ran out of funds months ago, but some programs continued from the CARES Act to the end of the year. Treasury Secretary trawled back hundreds of billions of dollars from the Fed this week, limiting their ability to step in where Congress is paralyzed. That might end up incentivizing Congress to do something quickly, since the failures will be left more directly at their doorstep now.
Governments are breaking the job market, and under Pottery Barn rules, you break it you buy it. This is a second round of the same emergency we successfully managed with targeted supports in the spring. Unfortunately, we’re breaking it, and we’re gonna buy it … the hard way or the really hard way.
Update: This is yet another red flag on the economy:
Personal income decreased $130.1 billion (0.7 percent) in October according to estimates released today by the Bureau of Economic Analysis (tables 3 and 5). Disposable personal income (DPI) decreased $134.8 billion (0.8 percent) and personal consumption expenditures (PCE) increased $70.9 billion (0.5 percent).
Real DPI decreased 0.8 percent in October and Real PCE increased 0.5 percent (tables 5 and 7). The PCE price index was unchanged from September. The PCE price index excluding food and energy was also unchanged (table 9).
This took place as benefits began to expire. It shows that the fuel for a consumer-driven economy continues to run out, as the Q3 report also showed in the preceding months. This is a big signal that consumers are about to shelter in place economically as well as physically, since they can’t spend what they don’t earn, at least not for long.