Data shows reversal in US hiring while housing recovery continues

The United States saw a small but worrying rise in unemployment claims last week, underscoring its continued struggles to recover from the mass layoffs caused by the coronavirus pandemic.

The Labor Department reported new filings for unemployment benefits had ticked up by 4,000 to 870,000 in the week ended September 19, only a slight increase from the week prior but still a massive number above the single worst week of the 2008-2010 global financial crisis.

Another 630,080 people filed new claims under a special program for those not normally eligible, only about 45,000 less than the previous week.

The data comes as Congress remains deadlocked on passing more stimulus to prop up consumers and businesses and other data showing key sectors struggling to regain ground lost when businesses closed in March to stop Covid-19.

Treasury Secretary Steven Mnuchin told the Senate Banking Committee the White House had “agreed to continue to have discussions” with Democrats on a new stimulus bill as economists warn the state of the world’s largest economy could deteriorate.

The rise in claims is “further evidence of the slowing pace of economic recovery,” Mohamed A. El-Erian of Allianz said on Twitter, noting the latest data went against analysts’ expectation of a continued week-on-week fall.

But the Commerce Department separately released data showing the housing market continuing its recovery unabated, with new home sales in August growing above expectations to an annualized rate of just over one million.

‘Disappointing and ominous’
The March business shutdowns were catastrophic for the economy, causing jobless benefit claims to surge to more than 6.8 million in late March and the unemployment rate to spike.

States’ moves to reopen have brought about some recovery, with claims retreating below the one million mark and the unemployment rate at 8.4 per cent in August.

But the numbers of jobless remain massive: the Labor Department said the insured unemployment rate indicating people actually receiving benefits fell only 0.1 percentage points to 8.6 per cent in the week ended September 12, the most recent week data was available.

All told, slightly more than 26 million people were receiving benefits under all programs in the week ended September 5.

The $2.2 trillion CARES Act passed in March included programs to support small businesses and give extra money to jobless workers, but those provisions have since expired and Democrats and Republicans are deadlocked on how much more assistance to provide.

Ian Shepherdson of Pantheon Macroeconomics called the latest data “disappointing and ominous,” and warned the coronavirus’s staying power and the impasse in Washington could hurt the economy.

“Consumers’ spending — nearly 70 per cent of the economy — can’t continue to increase at its recent pace in the aftermath of the ending of enhanced unemployment benefits, and the latest upturn in Covid cases and hospitalizations… threatens to trigger renewed restrictions on economic activity,” he wrote in an analysis.

Unequal hardship
A survey released by the Pew Research Center on Thursday showed the extent of the economic damage in the US, finding that a quarter of adults said they or someone in their household lost their job due to the pandemic.

Another 25 per cent have had trouble paying bills and a third have had to dip into their savings for money since the downturn began.

Black and Hispanic Americans, people without college degrees and people with low incomes reported higher rates of such hardships, though the study acknowledged some respondents may have faced these problems before Covid-19.

The Commerce Department data showed those who could afford homes continuing to buy undaunted despite the downturn, with new home sales up 4.8 per cent in August compared to July.

Given similarly positive momentum among existing home sales, Mickey Levy of Berenberg Capital Markets said he expected “favourable demographics and pent-up demand from younger age cohorts to support housing demand in the intermediate-term.”

(Source: BSS)