The number of Americans filing new claims for unemployment benefits fell to a seven-month low last week, but the pace of decline has slowed and further improvement could be limited by a raging COVID-19 pandemic and lack of additional fiscal stimulus.
Other data on Thursday showed consumer prices were unchanged in October as moderate gains in the cost of food were offset by cheaper gasoline amid slack in the economy. The frail economy is one of the major challenges president-elect Joe Biden faces when he takes over from President Donald Trump in January.
Initial claims for state unemployment benefits fell by 48,000 to a seasonally adjusted 709,000 for the week ended Nov. 7. Data for the prior week were revised to show 6,000 more applications received than previously reported.
Economists polled by Reuters had forecast 735,000 applications in the latest week.
Despite claims dropping to their lowest since March, they remained above their peak of 665,000 during the 2007-09 Great Recession. Weak demand, especially in the services sector, is forcing employers to shed workers. Layoffs could accelerate as new coronavirus cases explode across the country.
Daily new COVID-19 infections are exceeding 100,000 and hospitalizations are surging as cooler weather draws people indoors, prompting some state and local governments to impose new restrictions on businesses. Even without restrictions, many consumers are likely to stay away from places such as bars, restaurants and gyms, fearing exposure to the illness. Restaurants and gyms moved outdoors during summer.
Unadjusted claims fell 20,799 to 723,105 last week. Economists prefer the unadjusted number given earlier difficulties adjusting the claims data for seasonal fluctuations because of 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, at least one million people filed claims last week.
Major U.S. stock indexes opened mixed as investors kept a wary eye on the coronavirus infections. The dollar slipped against a basket of currencies. U.S. Treasury prices rose.
Unemployment claims peaked at a record 6.867 million in March. Much of the improvement in the labour market came from businesses recalling laid-off and furloughed workers as companies and the unemployed accessed their share of more than US$3-trillion in government coronavirus relief.
But fiscal stimulus has run out, which will make it harder for the economy to generate enough jobs to absorb the millions of unemployed Americans. The number of people receiving benefits after an initial week of aid declined 436,000 to 6.786 million in the week ending Oct. 31. That partly reflected many people exhausting their six months of state benefits.
A total of 4.143 million people filed for extended unemployment benefits in the week ending Oct. 24, up 159,776 from the prior week. About 21.2 million people were receiving jobless benefits in late October.
The government reported last week that non-farm payrolls rose by 638,000 jobs in October, the smallest gain since the jobs recovery started in May. That followed 672,000 jobs added in September. Only 12.1 million of the 22.2 million jobs lost in March and April have been recovered.
In another report on Thursday, the Labour Department said its consumer price index was unchanged last month after a 0.2-per-cent increase in September. A 0.2-per-cent rebound in food prices was offset by a 0.5-per-cent drop in the cost of gasoline.
In the 12 months through October, the CPI climbed 1.2 per cent after increasing 1.4 per cent in September. Benign inflation could allow the Federal Reserve to keep its ultraeasy monetary policy for a long time to aid the recovery from the COVID-19 recession.
Economists polled by Reuters had forecast the CPI would nudge up 0.1 per cent in October and advance 1.3 per cent on a year-on-year basis.
Excluding the volatile food and energy components, the CPI was also flat in October after rising 0.2 per cent in the prior month. Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.2 per cent after ticking up 0.1 per cent in September. That offset a 0.4-per=cent decline in the cost of health care.
The so-called core CPI increased 1.6 per cent on a year-on-year basis after gaining 1.7 per cent in September.
The Fed’s preferred inflation measure, the core personal consumption expenditures (PCE) price index rose 1.5 per cent in the 12 months through September. The central bank has a 2-per-cent target, a flexible average. October’s core PCE price index data are scheduled to be released at the end of this month.
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