Tag Archives: unemployment insurance

Trust the experts they say: Feds are realizing they were wrong as millions of jobs vanish

Bloomberg-Labor-Stats-chart

Important Takeaways:

  • US job growth in the year through March was likely far less robust than initially estimated, which risks fueling concerns that the Federal Reserve is falling further behind the curve to lower interest rates.
  • Goldman Sachs Group Inc. and Wells Fargo & Co. economists expect the government’s preliminary benchmark revisions on Wednesday to show payrolls growth in the year through March was at least 600,000 weaker than currently estimated — about 50,000 a month.
  • While JPMorgan Chase & Co. forecasters see a decline of about 360,000, Goldman Sachs indicates it could be as large as a million.
  • There are a number of caveats in the preliminary figure, but a downward revision to employment of more than 501,000 would be the largest in 15 years and suggest the labor market has been cooling for longer — and perhaps more so — than originally thought. The final numbers are due early next year.
  • Once a year, the BLS benchmarks the March payrolls level to a more accurate but less timely data source called the Quarterly Census of Employment and Wages, which is based on state unemployment insurance tax records and covers nearly all US jobs. The release of the latest QCEW report in June already hinted at weaker payroll gains last year.

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U.S. coronavirus wildfire hitting jobs as broad recovery trudges on

By Howard Schneider

WASHINGTON (Reuters) – The most intense U.S. coronavirus outbreak yet appears to have slowed hiring and may have begun to drag on retail spending on the cusp of the holiday shopping season, even as overall economic activity proves more resilient than in the spring.

But that uneasy coexistence – wildfire-like spread of a deadly disease with an economy that remains largely open – may be tested in coming weeks if face mask mandates and lighter-touch restrictions imposed by local governments fail to curb the spread of COVID-19. Infections are growing by more than 1 million a week, according to data from the COVID Tracking Project, and the week-to-week percentage change is rising too.

Some local governments are taking more aggressive steps, with New York City again closing schools, and in a rare federal response from the “lame-duck” administration of President Donald Trump, the U.S. Centers for Disease Control and Prevention urged Americans not to travel for next week’s Thanksgiving holiday, which typically sees tens of millions on the move.

Most states, though, are moving gingerly, curbing restaurant hours or seating capacity, but not shuttering nonessential businesses like during the early months of the U.S. outbreak in the spring.

Still, the surge in cases appears to have capped the U.S. economic rebound, according to high-frequency data tracked by economists for real-time evidence about the recovery.

Employment at a sample of mostly small businesses from time management firm Homebase declined for a fourth week, and shifts worked across different industries fell, according to time management firm UKG.

“The uncertainty that exists right now and has existed really since mid-summer is making it really hard for business owners to think about growth,” said David Gilbertson, UKG vice president for strategy and operations. “We seem to take one step forward, and then one step back.”

The decline in shifts from mid-October to mid-November likely points to a weakening jobs report in November, he said.

LOOKING ‘GRIM’

Since the spring’s catastrophic drop in employment, the economy has clawed back about half of the more than 20 million lost positions. But momentum is slowing, and last week the number of new claims for unemployment insurance rose for the first time in about a month.

An index of new job postings from analytics firm Chmura as of August had reached a high of 85% of the level predicted in the absence of the pandemic, but is now at 67%.

Workers may be in for a “grim” period, said AnnElizabeth Konkel, economist at Indeed Hiring Lab, whose index of job postings remains 13% below 2019 levels. Holiday hiring is largely complete, and unemployment benefits are expiring for many of those out of work since the spring, a lapse that may finally be weighing on national data.

Initially, the flood of government support increased incomes for many families and supported consumer spending. Data on 30 million JPMorgan debit- and credit-card customers, however, showed spending fell “notably” in early November from a level just 2.7% below 2019 to 7.4% below last year, said JPMorgan economist Jesse Edgerton.

Declines were sharper in places where COVID-19 was spreading more rapidly but were still widespread, suggesting “a broader pullback in spending,” Edgerton wrote. U.S. retail sales in October also grew less than expected.

That and other data indicate an outright decline in jobs in November versus October, Edgerton said, evidence that millions left jobless by the pandemic face a long road back to normal.

SOME IMPROVEMENTS

Vaccine prospects, however, “represent a ray of light at the end of the tunnel,” said Gregory Daco, chief U.S. economist at Oxford Economics. Oxford recovery tracker rose slightly last week, snapping a five-week skid, a sign that the scale of economic collapse seen in the spring is not in the offing.

Data from OpenTable showed a slight rise in diners seated at restaurants over the past week even as new limits were imposed.

Some Federal Reserve officials have noted how businesses, particularly in manufacturing, construction and some parts of the retail sector, have adapted to operating during the pandemic. A New York Fed weekly index projecting growth in gross domestic product has risen steadily since the recession began.

But Oxford’s index and other data have also remained largely stalled, well below pre-pandemic levels. Data tracking cellphone movement from Unacast, for example, has shown no upward trend since summer.

That may remain the case until vaccines are rolled out to enough people to make a difference.

Meanwhile, “the recovery is becoming entrenched in a low-growth mode, and we are worried about signs of lasting economic damage,” Daco wrote.

(Reporting by Howard Schneider; Editing by Dan Burns and Paul Simao)

Virtual schooling dents retail sales, Trump economic message

By Ann Saphir

(Reuters) – Slower-than-expected sales at retailers in August suggest a speed bump is emerging in the U.S. economic recovery from coronavirus lockdowns, less than two months before the Nov. 3 presidential election.

Overall, retail sales have returned to their pre-crisis levels and then some, gaining 0.6% in August, the Commerce Department said on Wednesday. The rebound plays into U.S. President Donald Trump’s narrative of resurgent growth after a sharp pandemic downturn. Incumbent presidents are generally helped at the polls by a strong economy, and hurt by a weak one.

But last month’s rise was driven in part by an increase in gasoline prices, not typically a cause for consumer celebration. Meanwhile core retail sales, a closer measure of underlying spending trends, fell 0.1% last month. Both readings fell short of economists’ expectations.

Back-to-school shopping season, or the lack of it, was one cause. Many students actually could not head back to the classroom because of COVID-19 restrictions, and their curbed spending on supplies helped drive down core retail spending, said Regions Financial Corp economist Richard Moody. Meanwhile, a jump in sales at restaurants and bars drove most of the gain in overall retail sales.

The softening comes as nearly 30 million Americans are on some form of unemployment insurance. An extra $600 weekly that out-of-work-adults were getting in government aid expired at the end of July; it was replaced by a program that sent out $300 payments, but stopped taking new applicants on Sept. 10.

Lawmakers have so far failed to agree to any new aid package, and without more fiscal help, economists say the recovery will stall.

“The economy is weak: there are no two sides around that,” says Eric Winograd, senior economist at AllianceBernstein. Part of a voter’s calculus in picking a president may be, “Do you think additional stimulus is necessary, and if so what do you want that to look like?”

(Reporting by Ann Saphir; editing by Heather Timmons and Nick Zieminski)

Not in the room where it happens: U.S. Senate’s McConnell opts out of coronavirus talks

By Richard Cowan

WASHINGTON (Reuters) – As coronavirus aid negotiations between top White House officials and Democratic leaders in the U.S. Congress bogged down over the past week, the question reverberating through near-empty Capitol hallways has been “Where’s Mitch?”

That’s Mitch McConnell, the Senate majority leader with the reputation of being a legislative mastermind and a tough, wily deal-maker.

McConnell, a Republican like President Donald Trump, said on Tuesday he is deliberately hanging back as Congress’s top Democrats and White House negotiators work out a deal to help American families stay afloat during severe economic times caused by the coronavirus pandemic.

If they reach a deal, he said, it would be “something I’m prepared to support even if I have some problems with certain parts of it.”

Unlike in past showdowns over spending and borrowing authority bills, McConnell would not bring a strong hand to negotiations – his party’s 53-member majority in the 100-seat Senate is deeply fractured over his $1 trillion package, with dissenters expected no matter what emerges from the talks.

The betting is that Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows could have an easier time without McConnell in the room as they try to craft a bill that will need Democratic support for passage anyway.

An arm’s-length appearance could also help deflect fallout if this legislative battle ends poorly, something that could be on his mind as he seeks to retain his seat in congressional and presidential elections in November.

That’s not to say that McConnell has gone AWOL. While he may not be in the sessions, he is in close touch with the White House behind the scenes.

“He’s definitely giving guidance,” Senator Bill Cassidy told Reuters on Tuesday. “Clearly Mnuchin and his team are the ones negotiating directly. But I certainly get a sense that they’re going in there knowing that which McConnell will accept and that which he will not.”

Senator Mike Rounds called McConnell’s approach pragmatic.

“In the past he’s made it clear that unless you have House Democrats on board and you have the White House on board, you’re really not going to get to a conclusion,” Rounds told reporters.

‘WE DO HAVE DIVISIONS’

Unlike the wall of opposition Republicans erected against former President Barack Obama’s landmark healthcare law, or the party’s lockstep backing for tax cuts, many Republicans are leery of spending more to battle COVID-19 — despite the virus’ impact on Americans’ lives and America’s economy.

McConnell’s pledge to support a deal, even as he keeps a low profile, could anger conservative Republican senators who have questioned whether Washington should do anything beyond the $3 trillion it already has passed to battle the fallout from the pandemic, which has killed more than 157,000 nationwide.

“We do have divisions,” McConnell acknowledged in his understated way.

In contrast, Democrats led by House of Representatives Speaker Nancy Pelosi and Senate Democratic Leader Chuck Schumer have presented a unified front around a $3 trillion proposal passed by the House in May.

On Tuesday, Schumer suggested McConnell had lost control of his caucus: “He’s not in the room negotiating because the Republicans can’t even articulate a coherent position.”

The Senate is being pressured from many sides to act on what could be the last piece of major legislation before election day on Nov. 3.

Trump, who has been trailing in polls versus presumptive Democratic nominee Joe Biden, repeatedly has called for steps to extend unemployment insurance or help those facing eviction from their homes, which Democrats have been pressing for months.

The U.S. Chamber of Commerce on Tuesday also urged action to protect businesses from liability lawsuits during the pandemic — McConnell’s main priority.

Former Republican House Speaker John Boehner always had a ready answer when he found himself, like McConnell now, in a tight spot.

“A leader without followers is simply a man taking a walk,” he would say during raucous times during his tenure.

Now, McConnell may have found himself in Boehner’s shoes.

(Reporting by Richard Cowan, David Morgan and Patricia Zengerle; Editing by Scott Malone and Sonya Hepinstall)