Layoffs are rising again and American incomes are falling, the latest sign that two strokes of a resurgent pandemic and waning government aid are weakening the US economic recovery.
Last week, applications for state unemployment benefits rose for the second week in a row, the Labor Department said Wednesday. Unemployment Reports have risen by more than 100,000 since the first week of November, when they reached their lowest level since last spring, the start of the pandemic.
Forecasts for weeks have warned that an increase coronavirus Cases can have dire economic consequences as consumers back out of spending and cities and states re-impose restrictions on businesses and social events. But while job growth and other indicators of progress have slowed since the summer, the recovery has proved surprisingly resilient.
Now cracks are starting to appear. The number of unemployment claims, unadjusted for seasonal patterns, rose by 78,000 last week to almost 828,000 – a big change from an increase of 18,000 a week earlier. For the first time since early September, the number of submissions increased for two consecutive weeks and was the largest two-week increase since April. Consumer confidence measures plunged sharply in November and real-time data from private sources show that the labor market is slowing down or starting to reverse.
Any reversal would be disappointing after months of economic progress. But that wouldn’t be surprising considering a new wave of business lockdowns and restrictions this made further layoffs almost inevitable. Chicago has introduced a new stay-at-home injunction in recent weeks, Los Angeles County has suspended outdoor dining, and Philadelphia has banned most private indoor meetings. Several states have terminated or restricted indoor dining. And even where officials have enacted no new laws, many consumers are likely to voluntarily restrict their activities to avoid contamination with the virus.
“The most obvious culprit behind the rising claims is a growing pandemic,” said Daniel Zhao, senior economist at Glassdoor career site. “It looks like it’s only a matter of time before it starts showing up in economic data.”
The latest figures are generally not gloomy. The Department of Commerce said Wednesday that orders for high-value goods such as machinery, a measure of business confidence, rose in October. Sales of new homes have also increased as the lowest interest rates continue to push the housing market up. Households have $ 1 trillion more in savings than before the pandemic, money that can fuel consumer spending as vaccines become widely available and the threat of the virus is gone. And the stock market, this highly imperfect economic barometer, established new heights.
For the most vulnerable people and industries, however, the prospects are bleak. In addition to a new round of business restrictions, a new wave of school closings could push parents – especially mothers – back out of the workforce. An increasing number of economists are forecasting a “double” recession, with economic activity falling again early next year.
Unlike in spring, families and businesses will have to deal with recent downtime largely on their own. Federal programs that have provided trillions of dollars in support to small businesses and unemployed workers lapsed in the summer, and efforts to revive them stuck to Congress. Many of the other programs end at the end of the year.
Data released by the Department of Commerce on Wednesday showed that personal incomes fell by 0.7 percent in October as declines in government aid offset the rise in wages. Consumer spending rose by 0.5 percent, the smallest increase since the recovery that began last spring.
“One of the reasons the recovery has gone so well is that there has been so much help to the affected businesses and workers, and this is really not the time to tear failure out of the mouth of victory,” said Julia Pollak, labor economist at ZipRecruiter. She added that more help is needed to “prevent this temporary disruption from becoming permanent destruction.”
Both Democratic and Republican leaders have said they want to pass a bailout package before the end of the year. But the two sides remain far apart and the prospects for a swift agreement seem blurred.
Congressional advisers and outside groups that monitored the stimulus talks this week said they did not expect the rise in unemployment claims to induce Senate Republicans to agree to anything akin to the $ 2 trillion package Democrats have been craving for months.
Advisers to President-elect Joseph R. Biden, Jr. plan the possibility of another contraction of the economy and urged lawmakers to approve the stimulus deal ahead of its inauguration in January. A small group of House of Representatives Democrats pressed President Nancy Pelosi to accept a smaller deal in order to reach a compromise with Senator Mitch McConnell of Kentucky, the majority leader.
The stakes are particularly high for the nearly 14 million Americans receiving unemployment benefits under two bailout programs, which are: will expire next month.
Data released on Wednesday showed that some nine million people were enrolled in the pandemic unemployment assistance program in early November, which includes freelancers, the self-employed and others who do not qualify for regular state benefits. The scheme has been plagued by fraud and double counting, and many economists believe the Department of Labor’s calculations overstate the real sum. Even so, in all respects, millions of people enrolled in the program will lose their benefits when the program ends.
An additional 4.5 million people are paid through Pandemic Emergency Unemployment Compensation, which adds 13 weeks of benefits to 26 weeks available in most states. Subscriptions to it grew rapidly as more and more people quit their regular state benefits.
Some of these individuals will qualify for a separate federal extended benefit program that existed prior to the pandemic. But this program is not available in all states.
Time cannot be worse for employees.
“We will be in the heart of winter, virus cases will likely hit the roof, and the workers’ holiday season is over,” said AnnElizabeth Konkel, economist at career website Indeed. “This puts those who potentially drop out of these benefit plans in a really precarious position.”
Additional risk: Federal legislation on blocking evictions and allowing borrowers to defer their mortgage and student loans also expires at the end of the year. The Trump administration may decide to extend them, but if it does not, families may lose their only source of income and the protection that keeps them in their homes.
“It’s a bit like crashing into a gigantic brick wall,” said Elizabeth Pancotti, a policy researcher who co-wrote last report on the cliff of benefits. “It’s not that it’s a good time to end all of these programs, but maybe they were all not a great idea on the same day.”
Jim Tankersley contributed to the reportage.