Tag Archives: Economy

U.S. private hiring rebounds solidly in January

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. private payrolls rebounded more than expected in January, suggesting the labor market recovery was back on track after the economy shed jobs in December as soaring COVID-19 infections hurt operations in the leisure and hospitality industry.

The ADP National Employment Report on Wednesday showed broad gains in hiring last month, though the pace was half of the monthly average job growth in the last six months of 2020. The stronger-than-expected rise in hiring was likely driven by the nearly $900 billion in additional pandemic relief provided by the government in late December.

“Recovery in payrolls is ongoing, albeit at a slow pace,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. “However, contact-facing businesses continue to face downside risks from virus-related restrictions.”

Private payrolls increased by 174,000 jobs last month after dropping by 78,000 in December. Economists polled by Reuters had forecast private payrolls would rebound by 49,000 in January.

The ADP report is jointly developed with Moody’s Analytics.

Goods producers added 19,000 jobs in January, with employment in the construction industry rising 18,000. Manufacturing payrolls gained only 1,000. Hiring in the services sector rebounded by 156,000 jobs after falling 73,000 in December. The leisure and hospitality industry added 35,000 jobs after shedding 79,000 positions in December.

January was the worst month of the coronavirus pandemic since it started in the United States, according to data from Johns Hopkins University, forcing consumers to hunker down.

The bounce back in hiring last month as authorities started to ease restrictions on businesses has offered hope of faster job growth in the months ahead as the boost from recent stimulus package fully kicks in and the vaccines rollout speeds up.

“The rebounds suggest that demand rebounded quickly once the latest coronavirus wave passed its peak,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

U.S. stocks opened higher after strong quarterly results from Alphabet and Amazon, and hopes of more stimulus. The dollar was steady against a basket of currencies. U.S. Treasury prices were lower.

SPOTTY RECORD

President Joe Biden has unveiled a recovery plan worth $1.9 trillion, though resistance from some lawmakers worried about the ballooning national debt could see the package trimmed. The Biden administration has pledged to speed up and simplify the distribution of vaccines.

Moody’s Analytics chief economist Mark Zandi said vaccines and fiscal stimulus could help to spur faster job growth.

The ADP report was published ahead of the government’s closely watched, and comprehensive, monthly employment report on Friday. Despite the solid ADP number, economists did not change their estimates for January nonfarm payrolls, noting its spotty record predicting the private payrolls count in the government’s employment report.

“We don’t think that the ADP report gives a very reliable signal about the Labor Department data,” said Daniel Silver, an economist at JPMorgan in New York.

According to a Reuters poll of economists payrolls likely increased by 50,000 jobs in January after declining by 140,000 in December, the first drop in employment in eight months.

Expectations for a rebound in hiring were bolstered by a report on Monday from the Institute for Supply Management showing that manufacturers hired more workers in January, though a flare-up in COVID-19 infections caused labor shortages at factories and their suppliers.

But the Conference Board’s survey last week showed consumers’ perceptions of labor market conditions deteriorated further in January.

The economy has recouped 12.5 million of the 22.2 million jobs lost in March and April. The Congressional Budget Office estimated on Monday that employment would not return to its pre-pandemic level before 2024.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)

COVID-19 wreaks havoc on U.S. economy; 2020 performance worst in 74 years

By Lucia Mutikani

WASHINGTON (Reuters) – The U.S. economy contracted at its deepest pace since World War Two in 2020 as the COVID-19 pandemic depressed consumer spending and business investment, pushing millions of Americans out of work and into poverty.

Though a recovery is underway, momentum slowed significantly as the year wound down amid a resurgence in coronavirus infections and exhaustion of nearly $3 trillion in relief money from the government. The moderation is likely to persist at least through the first three months of 2021.

The economy’s prospects hinge on the distribution of vaccines to fight the virus. President Joe Biden has unveiled a recovery plan worth $1.9 trillion, but some lawmakers have balked at the price tag soon after the government provided nearly $900 billion in additional stimulus in late December.

“The economy will never move further away from the edge of the cliff of recession unless there is a resurgence in final demand, meaning consumers have to come out in force to make the recovery a permanent one,” said Chris Rupkey, chief economist at MUFG in New York.

Gross domestic product decreased 3.5% in 2020, the biggest drop since 1946, the Commerce Department said on Thursday. That followed 2.2% growth in 2019 and was the first annual decline in GDP since the 2007-09 Great Recession.

Nearly every sector, with the exception of government and the housing market, contracted last year. Consumer spending, which accounts for more than two-thirds of the economy, plunged 3.9%, the worst performance since 1932. The economy tumbled into recession last February.

Delays by the government to offer another rescue package and renewed business disruptions caused by the virus restricted GDP growth to a 4.0% annualized rate in the fourth quarter. The big step-back from a historic 33.4% growth pace in the third quarter left GDP 2.5% below its level at the end of 2019.

The economy is expected to return to its pre-pandemic level in the second quarter of this year.

The Federal Reserve on Wednesday left its benchmark overnight interest rate near zero and pledged to continue pumping money into the economy through bond purchases, noting that “the pace of the recovery in economic activity and employment has moderated in recent months.”

With the virus still raging, economists are expecting growth to slow to around a 1.0% rate in the first quarter, before regaining speed by summer as the additional stimulus kicks in and more Americans get vaccinated.

“We foresee record-breaking consumer spending growth in 2021 with households benefiting from a watered-down $1.2 trillion version of Biden’s rescue plan, vaccine diffusion gradually reaching two thirds of Americans by July and employment accelerating this spring,” said Gregory Daco, chief U.S. economist at Oxford Economics in New York.

Stocks on Wall Street were trading higher. The dollar slipped against a basket of currencies. U.S. Treasury prices were lower.

K-SHAPED RECOVERY

The services sector, especially restaurants, bars and hotels, has borne the brunt of the coronavirus recession, disproportionately impacting lower-wage earners, who tend to be women and minorities. That has led to a so-called K-shaped recovery, where better-paid workers are doing well while lower-paid workers are losing out.

The stars of the recovery have been the housing market and manufacturing as those who are still employed seek larger homes away from city centers, and buy electronics for home offices and schooling. Manufacturing’s share of GDP has increased to 11.9% from 11.6% at the end of 2019.

A survey by professors at the University of Chicago and the University of Notre Dame showed poverty increased by 2.4 percentage points to 11.8% in the second half of 2020, boosting the ranks of the poor by 8.1 million people.

Rising poverty was underscored by persistent labor market weakness. In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits totaled a seasonally adjusted 847,000 for the week ended Jan. 23. While that was down 67,000 from the prior week, claims remain well above their 665,000 peak during the 2007-09 Great Recession.

Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs 1.3 million people filed claims last week.

The economy shed jobs in December for the first time in eight months. Only 12.4 million of the 22.2 million jobs lost in March and April have been recovered. About 18.3 million Americans were receiving unemployment checks in early 2021.

“The labor market is struggling this winter, but better times are ahead,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.

Lack of jobs and the temporary expiration of a government weekly jobless subsidy curtailed growth in consumer spending to a 2.5% rate in the fourth quarter after a record 41% pace in the July-September quarter.

But business investment grew at a 13.8% rate, with spending on equipment rising at a 24.9% pace. Spending on nonresidential structures rebounded after four straight quarterly declines.

Businesses also accumulated inventories last quarter, contributing to GDP growth. But the inventory build pulled in more imports, leading to a larger trade deficit, which subtracted from output. The housing market recorded another quarter of double-digit growth, thanks to historically low mortgage rates. Government spending was weak.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

COVID-19, renewed benefits boost U.S. weekly jobless claims

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing first-time applications for unemployment benefits surged last week, confirming a weakening in labor market conditions as a worsening COVID-19 pandemic disrupts operations at restaurants and other businesses.

The larger-than-expected increase in weekly unemployment claims reported by the Labor Department on Thursday was seen by some economists as driven by the recent renewal of supplemental jobless benefits, but nonetheless raised the risk of further job losses in January after nonfarm payrolls slumped in December for the first time in eight months.

“The economy clearly needs additional support from Washington because right now rising jobless claims tells us the labor market recovery has stalled and the direction is full-tilt down,” said Chris Rupkey, chief economist at MUFG in New York.

Initial claims for state unemployment benefits increased 181,000 to a seasonally adjusted 965,000 for the week ended Jan. 9, the highest since late August. Economists polled by Reuters had forecast 795,000 applications in the latest week.

Unadjusted claims shot up 231,335 to 1.151 million last week. Economists prefer the unadjusted number because of earlier difficulties adjusting the claims data for seasonal fluctuations due to the economic shock caused by the pandemic. Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs 1.4 million people filed claims last week.

U.S. stocks opened higher as investors awaited details of Biden’s rescue plan. The dollar rose against a basket of currencies. U.S. Treasury prices were lower.

STRICTER MEASURES

The surge in claims last week also likely reflected reapplications for benefits following the government’s renewal of a $300 unemployment supplement until March 14 as part of the latest stimulus package. Government-funded programs for the self-employed, gig workers and others who do not qualify for the state unemployment programs as well as those who have exhausted their benefits were also extended.

“Not all individuals eligible for unemployment assistance actually claim benefits, and the supplementary payments add an incentive to file for benefits,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York.

Authorities in many states have banned indoor dining to slow the spread of the coronavirus. The economy shed jobs in December for the first time in eight months.

The Federal Reserve’s Beige Book report of anecdotal information on business activity collected from contacts nationwide in early January showed on Wednesday that “contacts in the leisure and hospitality sectors reported renewed employment cuts due to stricter containment measures.”

The central bank also noted that the resurgence in the coronavirus was causing staff shortages in the manufacturing, construction and transportations sectors. The virus has infected more than 22.5 million people in the United States and killed over 376,188, the most of any country.

Though jobless claims have dropped from a record 6.867 million in March, they remain above their 665,000 peak during the 2007-09 Great Recession. Economists say it could take several years for the labor market to recover from the pandemic.

The claims report showed the number of people receiving benefits after an initial week of aid increased 199,000 to 5.271 million during the week ending Jan. 2. At least 18.4 million were on unemployment benefits on all programs in late December.

Labor market stress could curb inflation amid signs of rising price pressures. In a separate report on Thursday, the Labor Department said import prices jumped 0.9% in December after rising 0.2% in November. Import prices were boosted by higher prices for energy products and recent dollar weakness.

Economists had forecast import prices, which exclude tariffs, accelerating 0.7% in December. In the 12 months through December, import prices slipped 0.3% after dropping 1.0% in November.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

Fed’s Bullard sees inflation rising, mum on QE taper

By Howard Schneider

(Reuters) – All signs are pointing to a rise in U.S. inflation, St. Louis Federal Reserve President James Bullard said on Wednesday, but though the economy may boom later this year, it’s too early to say when the Fed could take any steps to pull back on its super-easy policy.

The money supply has “exploded,” fiscal deficits are “off the charts” and a hot economy may either already be here or “just around the corner,” Bullard said in an interview at the Reuters Next conference.

And with vaccines going first to the elderly and others who are most at risk of dying from COVID-19, he said, daily deaths – now likely near their peak – will drop. “You are going to see that’s going to have big ramifications for the economy” as people worry less about the risks, he said.

“I don’t think there will be a spectacular date when you can say, ‘All clear.'” Bullard said. “I think what will happen is the disease will be less deadly…the virus is going to run out of victims.”

Still, Bullard said, labor markets still have a “long way to go” before they are healed. And even with inflation set to rise, the Fed won’t preemptively tighten policy in response. Inflation has underrun the Fed’s 2% target for the last decade, and has pledged to allow it to exceed 2% for some time to reestablish its credibility.

The Fed has kept rates near zero since last March and has signaled it will keep them there for years to give inflation time to do just that. The central bank has also vowed to keep buying Treasuries and mortgage-backed securities at its current pace of $120 billion a month until it sees “substantial” further progress toward its goals of full employment and price stability.

While a couple Fed policymakers have said they could see that bar being met later this year, Bullard said Wednesday he still needs to see how things develop.

“Labor markets have improved dramatically but still have a long way to go… you still need unemployment to drop, jobs to come back… certain sectors have really been hard hit and for them to come back we are going to have to get this vaccine rolled out,” he said. For the economy as a whole, “it’s possible you get a boom… but let’s wait and see if that actually happens.”

(Reporting by Howard Schneider and Ann Saphir; Editing by Chizu Nomiyama)

After months of inaction, U.S. Congress approves $892 billion COVID-19 relief package

By Richard Cowan and Andy Sullivan

WASHINGTON (Reuters) – The U.S. Congress on Monday approved an $892 billion coronavirus aid package, throwing a lifeline to the nation’s pandemic-battered economy after months of inaction, while also keeping the federal government funded.

President Donald Trump is expected to sign the package into law.

Following days of furious negotiation, both legislative chambers worked deep into the night to pass the bill – worth about $2.3 trillion including spending for the rest of the fiscal year – with the House of Representatives first approving it and the Senate following suit several hours later in a bipartisan 92-6 vote.

The virus relief bill includes $600 payments to most Americans as well as additional payments to the millions of people thrown out of work during the COVID-19 pandemic, just as a larger round of benefits is due to expire on Saturday.

The stimulus package, the first congressionally approved aid since April, comes as the pandemic is accelerating in the United States, infecting more than 214,000 people every day and slowing the economic recovery. More than 317,000 Americans have died.

House Speaker Nancy Pelosi, a Democrat, said she supported the virus relief bill even though it did not include the direct aid for state and local governments that Democrats had sought.  The bill, she said, “doesn’t go all the way but it takes us down the path.”

Republican Representative Hal Rogers, who also supported the package, said “it reflects a fair compromise.”

At 5,593 pages, the wide-ranging bill that also spends $1.4 trillion on an array of federal programs through the end of the fiscal year in September, is likely to be the final major piece of legislation for the 116th Congress that expires on Jan. 3. Congress included a measure continuing current levels of government spending for seven days, ensuring no interruption to federal operations.

MCCONNELL CLAIMS VICTORY

It has a net cost of roughly $350 billion for coronavirus relief, Republican Senate Majority Leader Mitch McConnell said, adding that more than $500 billion in funding comes from unspent money Congress had authorized.

Both Democrats and Republicans claimed victory but McConnell argued that the final bill came close to what Democrats rejected months ago as insufficient.

The measure ended up far less than the $3 trillion called for in a bill that passed the Democratic-controlled House in May, which the Republican-controlled Senate ignored.

“Compare the shape of this major agreement with the shape of what I proposed all the way back in late July. Yes, some fine details are different,” McConnell said in a statement after the vote. “There is no doubt this new agreement contains input from our Democratic colleagues. It is bipartisan. But these matters could have been settled long ago.”

A months-long impasse on relief that played in the background of the U.S. presidential election was broken after a group of centrist lawmakers from both parties put forward a proposal that served as a framework for the final bill.

Even so, the bill was so unwieldy that it caused congressional computers to malfunction. It includes a hodgepodge of tax breaks and other proposals that failed to pass on their own, including two new Smithsonian museums and limits on surprise medical billing.

The legislation also renews a small-business lending program by about $284 billion and steers money to schools, airlines, transit systems and vaccine distribution.

PUBLIC COMPANIES EXCLUDED

The small-business loan and grant program, known as the Paycheck Protection Program, would exclude publicly traded companies from eligibility.

State and local governments, which are struggling to pay for the distribution of newly approved COVID-19 vaccines, would receive $8.75 billion from Washington, with $300 million of that targeted at vaccinations in minority and high-risk populations.

The deal, worked out in a rare weekend session of Congress, omits the thorniest sticking points, which included Republicans’ desire for a liability shield to protect businesses from coronavirus-related lawsuits as well as Democrats’ request for a large outlay of money for cash-strapped state and local governments.

If signed into law, the bill would be the second-largest stimulus package in U.S. history, behind the roughly $2 trillion aid bill passed in March. Experts said that money played a critical role as social-distancing measures shuttered wide swaths of the economy.

(Reporting by Richard Cowan and Andy Sullivan in Washington; Additional reporting by Susan Heavey and Lisa Lambert in Washington; Writing by James Oliphant; Editing by Scott Malone, Matthew Lewis and Peter Cooney)

U.S. third-quarter productivity pared; unit labor costs revised up

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. worker productivity increased strongly in the third quarter, though the pace of growth was likely overstated as the sharp rebound in output from the COVID-19 pandemic recession has far outpaced employment gains.

The Labor Department said on Tuesday nonfarm productivity, which measures hourly output per worker, increased at a 4.6% annualized rate last quarter. The slight downward revision from the 4.9% pace estimated last month followed a 10.6% rate of growth in the second quarter, which was the fastest since the first quarter of 1971.

The economy expanded at a historic 33.1% annualized rate in the July-September quarter, thanks to more than $3 trillion in government pandemic relief for businesses and workers. That followed a record 31.4% pace of contraction in the second quarter. Strong productivity explains the divergence between GDP growth and the labor market.

The economy has recouped two-thirds of output lost during the coronavirus crisis, while only about 56% of the 22.2 million jobs lost in March and April. A wide gap between output and employment is not unusual during recessions, with a similar trend observed during the 2007-09 Great Recession.

Economists polled by Reuters had forecast productivity growth would be unrevised at a 4.9% rate in the third quarter. The COVID-19 downturn has decimated lower-wage industries, like leisure and hospitality, which economists say tend to be less productive.

According to Moodys’ Analytics chief economist, Mark Zandi, there has been a shift in economic activity to big companies from small and medium-sized retailers. Zandi also noted that big businesses across industries are taking advantage of the pandemic to aggressively implement labor-saving technology.

“The underlying rate of productivity has not shifted from what it was before,” said Zandi. “There is no fundamental shift in productivity growth going forward, but it means it’s going to take a while to recover all the jobs lost unless we have good policy in place.”

U.S. financial markets were little moved by the data.

Compared to the third quarter of 2019, productivity increased at a 4.0% rate instead of the 4.1% pace reported last month.

Hours worked rebounded at a 37.1% rate, rather than the 36.8% rate estimated in November. That followed a record 42.9% pace of decline in the second quarter.

Unit labor costs – the price of labor per single unit of output – plunged at a 6.6% rate instead of an 8.9% rate as previously reported. Unit labor costs rose at a 12.3% pace in the second quarter. They increased at a 4.0% rate from a year ago.

“The big swings in the unit labor costs data in recent quarters make it hard to detect an underlying trend, but overall we think that the shock to the economy coming from COVID-19 should weigh on employee compensation,” said Daniel Silver, an economist at JPMorgan in New York.

Hourly compensation fell at a 2.3% rate last quarter, instead of a 4.4% pace as previously reported. That followed a 24.3% rate of acceleration in the second quarter. Compensation increased at a 8.2% rate compared to the third quarter of 2019.

(Reporting by Lucia Mutikani; Editing by Andrew Heavens and Andrea Ricci)

Airlines set to lose $157 billion amid worsening slump: IATA

By Laurence Frost

PARIS (Reuters) – Airlines are on course to lose a total $157 billion this year and next, their main global body warned on Tuesday, further downgrading its industry outlook in response to a second wave of coronavirus infections and shutdowns afflicting major markets.

The International Air Transport Association (IATA), which in June had forecast $100 billion in losses for the two-year period, said it now projects a $118.5 billion deficit this year alone, and a further $38.7 billion for 2021.

The bleak outlook underscores challenges still facing the sector despite upbeat news on development of COVID-19 vaccines, whose global deployment will continue throughout next year.

“The positive impact it will have on the economy and air traffic will not happen massively before mid-2021,” IATA Director General Alexandre de Juniac told Reuters.

Passenger numbers are expected to drop to 1.8 billion this year from 4.5 billion in 2019, IATA estimates, and will recover only partially to 2.8 billion next year. Passenger revenue for 2020 is expected to have plunged 69% to $191 billion.

“That’s by far the biggest shock the industry has experienced in the post-World War Two years,” IATA Chief Economist Brian Pearce said.

The forecasts assume significant re-opening of borders by the middle of next year, helped by some combination of COVID-19 testing and vaccine deployment.

IATA reiterated its call for governments to replace travel-stifling quarantine regimes with widespread testing programs.

“We are seeing states progressively coming to listen to us,” de Juniac said, citing testing initiatives underway in France, Germany, Italy, Britain, the United States and Singapore.

While some governments and airlines such as Australia’s Qantas say passengers are likely to require vaccination for long-haul travel, the approach is unlikely to work everywhere, de Juniac said.

“It would prevent people who are refusing (the vaccine) from travelling,” the IATA chief said. “Systematic testing is even more critical to reopen borders than the vaccine.”

Air cargo, a rare bright spot for the industry as the grounding of flights pushes freight prices higher, will likely see global revenue rise 15% to $117.7 billion this year despite an 11.6% decline in volume to 54.2 million tonnes, IATA said.

Some $173 billion in government aid has left recipients with debts that threaten to hobble future investment, it warned, and more bankruptcies are likely. Norwegian Air became the latest casualty on Nov. 18, when it filed for bankruptcy protection in Ireland.

The average airline now has enough liquidity to survive another 8.5 months, while some have just weeks, Pearce said. “I think we will get consolidation through some airline failures.”

(Reporting by Laurence Frost; Additional reporting by Johnny Cotton; Editing by Mark Potter and David Evans)

Analysis: Trump or Biden, new U.S. president faces troubled economy

By Ann Saphir and Jonnelle Marte

(Reuters) – It’s still not clear yet if the next U.S. president will be incumbent Donald Trump or Democratic challenger Joe Biden, but whoever triumphs will face monumental challenges on the economic front.

The recession has been ugly. It has wiped away more than a year of economic output and more than five years of jobs growth.

The workforce is now smaller than it was a year before Trump first took office.

One bright spot – consumer spending – is stronger than it was right after the pandemic exploded in March, but still only back to where it was last June.

Housing prices are on the rise, which is a great thing for U.S. homeowners but at the same time is worsening the affordability crisis for aspiring home buyers.

Manufacturing activity – a key concern in the Midwestern battleground states – has rebounded, but manufacturing employment is in worse shape than employment overall.

And the coronavirus is still surging across most of the United States. Nearly 6,000 people died last week, and there’s growing concern that the U.S. might need to reinstate lockdowns that happened across Europe in order to get it under control.

But despite signs the economy has begun to slow again amid another viral onslaught, “it is almost certain that the economy will get better over the course of 2021,” says Jason Furman, a key economic advisor to Barack Obama, the last U.S. president elected during a time of economic turmoil.

Late 2021 is still a long ways away, not just in political terms but for those living paycheck to paycheck, or out of work.

Federal Reserve policymaker projections put unemployment at 5.5% by the end of next year – worse than the 4.7% when Trump was first elected, but an improvement over the current 7.9%.

Beyond jobs lost and economic output curtailed, either Trump or Biden will face a list of long-term headwinds including deepening inequality, rising federal debt and tattered international trade relations.

In the run-up to the election, Trump consistently polled better than Biden on his ability to create jobs and manage the economy, if not the virus.

But even with the election outcome uncertain, and likely to remain so for some time amid legal challenges, stock market investors like what they see.

That’s partly because Republicans look likely to keep their hold on the Senate, leaving policy priorities relatively unchanged if it’s Trump emerging the winner, or as preventive force to a president Biden from trying to push through any big policy changes should he come out on top in the ballot box.

It’s also because Senate Majority Leader Republican Mitch McConnell signaled Wednesday he was open to a new coronavirus aid bill in the “lame duck” session before the elected members of Senate and U.S. House of Representatives are sworn in.

For the still-weak economy, a lot will depend on the timing, size and shape of a pandemic relief package, which eluded lawmakers and the White House before the election.

A more modest fiscal package could mean “the growth outlook and corporate profits may not be as vigorous as hoped,” said James Knightley, chief international economist for ING.

A Biden presidency with a majority Republican Senate could offer the worst case for the economy in 2021 because Republicans are likely to oppose a substantial stimulus package, said Matthew Luzzetti, chief U.S. economist at Deutsche Bank.

That would be bad news for the millions of low- and middle-income Americans out of work and struggling to find jobs in sectors such as travel and entertainment that are likely to remain moribund until the pandemic is under better control.

A scenario where Trump is re-elected and the Senate stays in Republican control could potentially result in more stimulus because Trump has advocated for more stimulus and could have more sway if he is re-elected, Luzzetti said.

Whatever the election outcome, any aid package should provide additional assistance for the unemployed, help for small businesses and assistance for state and local governments, to keep economic momentum going, Luzzetti said.

(Reporting by Ann Saphir and Jonnelle Marte; Editing by Heather Timmons, Paul Simao and Edward Tobin)

‘You are no longer my mother’: How the election is dividing American families

By Tim Reid, Gabriella Borter and Michael Martina

LOS ANGELES (Reuters) – When lifelong Democrat Mayra Gomez told her 21-year-old son five months ago that she was voting for Donald Trump in Tuesday’s presidential election, he cut her out of his life.

“He specifically told me, ‘You are no longer my mother, because you are voting for Trump’,” Gomez, 41, a personal care worker in Milwaukee, told Reuters. Their last conversation was so bitter that she is not sure they can reconcile, even if Trump loses his re-election bid.

“The damage is done. In people’s minds, Trump is a monster. It’s sad. There are people not talking to me anymore, and I’m not sure that will change,” said Gomez, who is a fan of Trump’s crackdown on illegal immigrants and handling of the economy.

Gomez is not alone in thinking the bitter splits within families and among friends over Trump’s tumultuous presidency will be difficult, if not impossible, to repair, even after he leaves office – whenever that is.

In interviews with 10 voters – five Trump supporters and five backing Democratic candidate Joe Biden – few could see the wrecked personal relationships caused by Trump’s tenure fully healing, and most believed them destroyed forever.

Throughout his nearly four-year norm-smashing presidency Trump has stirred strong emotions among both supporters and opponents. Many of his backers admire his moves to overhaul immigration, his appointment of conservative judges, his willingness to throw convention to the wind and his harsh rhetoric, which they call straight talk.

Democrats and other critics see the former real estate developer and reality show personality as a threat to American democracy, a serial liar and a racist who mismanaged the novel coronavirus pandemic that has killed more than 230,000 people in the United States so far. Trump dismisses those characterizations as “fake news.”

Now, with Trump trailing Biden in opinion polls, people are beginning to ask whether the fractures caused by one of the most polarizing presidencies in U.S. history could be healed if Trump loses the election.

“Unfortunately, I don’t think national healing is as easy as changing the president,” said Jaime Saal, a psychotherapist at the Rochester Center for Behavioral Medicine in Rochester Hills, Michigan.

“It takes time and it takes effort, and it takes both parties – no pun intended – being willing to let go and move forward,” she said.

Saal said tensions in people’s personal relationships have spiked given the political, health and social dynamics facing the United States. Most often she sees clients who have political rifts with siblings, parents or in-laws, as opposed to spouses.

NEIGHBOR VS NEIGHBOR

Trump’s election in 2016 divided families, tore up friendships and turned neighbor against neighbor. Many have turned to Facebook and Twitter to deliver no-holds-barred posts bashing both Trump and his many critics, while the president’s own freewheeling tweets have also inflamed tensions.

A September report by the non-partisan Pew Research Center found that nearly 80% of Trump and Biden supporters said they had few or no friends who supported the other candidate.

A study by the Gallup polling organization in January found that Trump’s third year in office set a new record for party polarization. While 89% of Republicans approved of Trump’s performance in office in 2019, only 7% of Democrats thought he was doing a good job.

Gayle McCormick, 77, who separated from her husband William, 81, after he voted for Trump in 2016, said, “I think the legacy of Trump is going to take a long time to recover from.”

The two still spend time together, although she is now based in Vancouver, he in Alaska. Two of her grandchildren no longer speak to her because of her support for Democrat Hillary Clinton four years ago. She has also become estranged from other relatives and friends who are Trump supporters.

She is not sure those rifts with friends and family will ever mend, because each believes the other to have a totally alien value system.

Democratic voter Rosanna Guadagno, 49, said her brother disowned her after she refused to support Trump four years ago. Last year her mother suffered a stroke, but her brother – who lived in the same California city as her mother – did not let her know when their mother died six months later. She was told the news after three days in an email from her sister-in-law.

“I was excluded from everything that had to do with her death, and it was devastating,” said Guadagno, a social psychologist who works at Stanford University, California.

Whoever wins the election, Guadagno is pessimistic that she can reconcile with her brother, although she says she still loves him.

UNCERTAIN POST-TRUMP WORLD

Sarah Guth, 39, a Spanish interpreter from Denver, Colorado, said she has cut several Trump-supporting friends out of her life. She could not reconcile herself to their support for issues such as separating immigrant children from parents at the southern border, or for Trump himself after he was caught on tape bragging about groping women.

Guth and her Trump-voting father did not speak to each other for several months after the 2016 election. The two now do speak, but avoid politics.

Guth says some of her friends cannot accept her support for a candidate – Joe Biden – who is pro-choice on the question of abortion.

“We had such fundamental disagreements about such basic stuff. It showed both sides that we really don’t have anything in common. I don’t believe that will change in the post-Trump era.”

Fervent Trump supporter Dave Wallace, 65, a retired oil industry sales manager in West Chester, Pennsylvania, is more optimistic about feuding families in a post-Trump world.

Wallace says his support for Trump has caused tensions with his son and daughter-in-law.

“The hatred for Trump among Democrats, it’s just amazing to me,” Wallace said. “I think it’s just Trump, the way he makes people feel. I do think the angst will decrease when we’re back to a normal politician who doesn’t piss people off.”

Jay J. Van Bavel, a professor of psychology and neural science at New York University, said this “political sectarianism” has become not only tribal, but moral.

“Because Trump has been one of the most polarizing figures in American history around core values and issues, people are unwilling to compromise and that is not something you can make go away,” Van Bavel said.

Jacquelyn Hammond, 47, a bartender in Asheville, North Carolina, no longer speaks to her Trump-supporting mother Carol, and is also discouraging her son from speaking to her.

She said she would like to heal the relationship, but believes that will be difficult, even if Trump loses the election.

“Trump is like the catalyst of an earthquake that just divided two continents of thought. Once the Earth divides like that, there’s no going back. This is a marked time in our history where people had to jump from one side to the other. And depending on what side you choose, that is going to be the trajectory for the rest of your life,” she said.

Hammond said she first realized her relationship with her mother was in trouble shortly after the 2016 election when she defended Clinton while driving with her mother.

“She stopped the car and told me not to disrespect her politics. And if I don’t want to respect her politics, I can get out of the car.”

Bonnie Coughlin, 65, has voted mostly Republican all her life, except in 2016 when she backed a third party candidate. This time she is all in for Biden, even holding a small rally for him on the side of a highway near Gilbertsville, Pennsylvania.

Raised in a Republican, religiously conservative family in Missouri, she says her relationships with her sister, father and some cousins – all ardent Trump supporters – have soured.

Coughlin says she still loves them, but “I look at them differently. It’s because they have willingly embraced someone who is so heartless and just shows no empathy to anyone in any circumstances.”

She added: “And if Biden wins, I don’t think they will go quietly into the night and accept it.”

(Reporting by Tim Reid in Los Angeles, Gabriella Borter in Raleigh, N.C. and Michael Martina in Detroit; Additional reporting by Elizabeth Culliford in London; Editing by Ross Colvin and Daniel Wallis)

U.S. weekly jobless claims below one million; but labor market recovery ebbing

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits fell below 1 million last week for the second time since the COVID-19 pandemic started in the United States, but that does not signal a strong recovery in the labor market.

The drop in initial claims to a five-month low reported by the Labor Department on Thursday largely reflected a change in the methodology it used to address seasonal fluctuations in the data, which economists complained had become less reliable because of the economic shock caused by the coronavirus crisis.

There are growing signs the labor market recovery from the depths of the pandemic in mid-March through April is faltering, with financial support from the government virtually depleted.

“There are new seasonal adjustment factors this week which brings down the joblessness slightly,” said Chris Rupkey, chief economist at MUFG in New York. “The labor market looks just as bad as it was and it will be a miracle if economic growth can continue at such a fast clip during this recovery if it has to drag along millions and millions of workers without paychecks.”

Initial claims for state unemployment benefits fell 130,000 to a seasonally adjusted 881,000 for the week ended Aug. 29. Economists polled by Reuters had forecast 950,000 applications in the latest week. A staggering 29.2 million people were on unemployment benefits in mid-August.

The Labor Department has switched to using additive factors to more accurately track seasonal fluctuations in the series. The government dropped the multiplicative seasonal adjustment factors it had been using because they could cause systematic over-or under-adjustment of the data in the presence of a large shift in the claims series.

Unadjusted claims rose 7,591 to 833,352 last week. The increase in the raw numbers, which many economists prefer to focus on, added to a raft of data suggesting the labor market recovery was ebbing.

A report on Wednesday from the Federal Reserve based on information collected from the U.S. central bank’s contacts on or before Aug. 24 showed an increase in employment. The Fed, however, noted that “some districts also reported slowing job growth and increased hiring volatility, particularly in service industries, with rising instances of furloughed workers being laid off permanently as demand remained soft.”

Private employers hired fewer workers than expected in August. In addition, data from Kronos, a workforce management software company, and Homebase, a payroll scheduling and tracking company, showed employment growth stagnated last month.

Another report on Thursday showed job cuts elevated in August amid layoffs by airlines. United Airlines said on Wednesday it was preparing to furlough 16,370 workers on Oct. 1.

Stocks on Wall Street were trading sharply lower. The dollar was steady against a basket of currencies. U.S. Treasury prices rose.

SEVERE DISTRESS

The weak labor market reports raise the risk of a sharper slowdown in job growth in August than is currently anticipated by financial markets. The government is scheduled to publish August’s employment report on Friday.

According to a Reuters survey of economists non-farm payrolls likely rose by 1.4 million jobs last month after increasing by 1.763 million in July. That would leave non-farm payrolls about 11.5 million below their pre-pandemic level.

The claims report also showed the number of people receiving benefits after an initial week of aid dropped 1.238 million to 13.254 million in the week ending Aug. 22. Part of the decrease in so-called continuing claims was likely because of people exhausting eligibility for benefits.

The number of people receiving unemployment benefits under all programs jumped 2.2 million to 29.2 million in the week ended Aug. 15.

“While Wall Street hits record highs, much of Main Street remains in severe distress,” said Ron Temple, head of U.S. Equity at Lazard Asset Management in New York. “The pandemic and the federal failure to sustain necessary assistance to households as well as state and local governments are weakening long-term economic growth and social stability.”

Fiscal stimulus boosted economic activity after it nearly ground to a halt following the shuttering of nonessential businesses in mid-March to control the spread of COVID-19. That set up the economy, which plunged into recession in February, for a sharp rebound in the third quarter.

A $600 weekly unemployment supplement expired in July and funding programs for businesses have also lapsed, leaving the outlook for growth uncertain. Also clouding the growth prospects, the trade deficit jumped 18.9% to a 12-year high of $63.6 billion in July, driven by a record surge in imports.

While the rise in imports could be blunted by an increase in inventories, export growth was moderate in July. That could threaten a recent acceleration in manufacturing activity.

A fourth report on Thursday showed growth in the services industry slowed in August. The services sector, which accounts for more than two-thirds of the U.S. economy, has been hardest hit by the pandemic.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)