Weekly jobless claims in the United States remain unchanged at 205,000; consumer spending increases in November
The number of Americans filing new jobless claims remained below pre-pandemic levels last week, as consumer spending rose sharply, putting the economy on track to a solid end until 2021.
But price pressures continued to intensify, with a measure of core inflation registering its largest annual increase since 1989 in November. The reports on Thursday came as the country grappled with a resurgence in COVID-19 infections, driven by Delta and the highly transmissible variant of Omicron, which could dampen economic growth in the first quarter.
“The increase in virus cases is a short-term risk, but overall we expect growth to pick up in the fourth quarter after a moderate pace in the third quarter,” said Rubeela Farooqi, chief states economist. United at High Frequency Economics in White Plains, New York.
Initial claims for state unemployment benefits remained unchanged at 205,000 seasonally adjusted for the week ended Dec. 18, the Labor Department said. Earlier this month, claims fell to a level last seen in 1969.
Economists polled by Reuters had forecast 205,000 candidates for last week. Claims have declined from a record 6.149 million at the start of April 2020.
Requests typically increase during the cold months, but an acute shortage of workers has disrupted this seasonal pattern, leading to a decline in the number of seasonally adjusted requests in recent weeks.
There were sharp declines in unadjusted claims in Missouri and Pennsylvania, which offset an increase in California.
“Beyond that noise, however, we expect claims to remain around 200,000 as layoffs remain low amid a tight labor market,” said Nancy Vanden Houten, chief US economist at Oxford Economics in New York.
“The spread of the Omicron variant may lend upside risk to this forecast, but for now, it appears companies are working hard to stay open.”
The claims data covered the period in which the government polled businesses for the non-farm wage portion of the December employment report.
Claims fell between the November and December survey periods, suggesting a pickup in job growth this month. However, labor shortages remain a challenge. There are encouraging signs that unemployed Americans are starting to return to the workforce, but the surge in coronavirus infections could be a hindrance.
The number of people continuing to receive benefits after a first week of aid fell from 8,000 to 1.859 million in the week ended December 11. This was the lowest level for alleged continuous requests since mid-March 2020.
Service buoy expenses
The job market is tightening, with the unemployment rate at its lowest level in 21 months, 4.2%. There was a record 11.0 million vacancies at the end of October.
Higher wages as companies scramble to find scarce workers help support consumer spending.
A separate Commerce Department report released Thursday showed consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.6% last month. Consumer spending rose 1.4% in October.
Services jumped 0.9%, almost all of the increase in spending last month. The general increase in services has been led by housing and utilities.
Spending on goods edged up 0.1%, as spending on durable manufactured products such as motor vehicles fell 0.6%, reflecting shortages. Spending on merchandise was also lower after Americans started holiday shopping early to avoid empty shelves.
The scarcity of goods slows down the capital expenditure of companies. A third Commerce Department report showed orders for non-military capital goods excluding aircraft, a closely watched indicator of business spending plans, fell 0.1% last month. These so-called basic capital goods orders jumped 0.9% in October.
Inflation accelerated in November. The personal consumption expenditure price index (PCE), excluding the volatile components of food and energy, rose 0.5% after a similar gain in October.
In the 12 months to November, the so-called core PCE price index accelerated by 4.7%. This was the largest increase since February 1989 and followed a 4.2% year-on-year gain in October.
When corrected for inflation, consumer spending remained stable after increasing 0.7% in October. Despite so-called real consumer spending unchanged last month, economic growth is expected to pick up in the fourth quarter.
The growth forecast for the fourth quarter is 7.2% at an annualized rate. The economy grew at a pace of 2.3% in the third quarter. It is expected to grow 5.6% this year, the fastest since 1984, according to a Reuters survey of economists. The economy contracted by 3.4% in 2020.
But the outlook for next year is cloudy. COVID-19 infections are skyrocketing and President Joe Biden’s $ 1.75 trillion national investment bill, known as Build Back Better, which aims to expand the social safety net and tackling climate change took a heavy blow on Sunday when moderate Democratic Senator Joe Manchin said he would not. support it. This prompted economists to lower their growth estimates for next year.