Claims for unemployment benefits increased discernibly to 853,000 last week, WSJ reports.
Why It Matters: These claims serve as a proxy for layoffs and have trended in the right direction since falling below one million per week at the end of August. However, it seems the number is ticking up again in a sign that American economic recovery is slowing or possibly getting worse.
- The weekly record figure before the pandemic was 695,000 claims.
Let’s Look At The Bright Side: While weekly claims have held in a “historically high range of 700,000 to 800,000 since mid-October, more than three times the pre-pandemic average,” it’s way lower than the March peak of roughly seven million.
- Also, the Government Accountability Office said, “a high level of claims during the pandemic and problems with temporary pandemic-related aid programs were causing states to provide flawed data for the Labor Department report.”
Last month, employers added 245,000 jobs, according to The Labor Department. It was the seventh consecutive month of improving numbers, but hiring has dramatically cooled. WSJ estimates that employment wouldn’t return to pre-pandemic levels until 2024 at November’s job growth rate.
- More than 20 million workers received unemployment benefits in mid-November.
The Takeaway: The U.S. economy had recovered a lot of what it lost — consumer spending improved in October for the sixth consecutive month, and the manufacturing and services sectors expanded in November. But the sentiment is clear, according to Challenger, Gray & Christmas Inc. (an outplacement firm) Senior VP Andy Challenger:
- “When someone is let go today, that means the company doesn’t see that job existing for a while,” he said.
The Bad: More Covid-19 cases and deaths, harder lockdowns, and worsening labor market trends.
The Good: Vaccines will start to be distributed within weeks and funds flows into equities look strong for 2021.
We’re in a tug of war right now and it will be interesting to see which way the market goes. I am generally bullish on a 6-12 month timeframe, though.