Has the recovery begun to run out of steam — and if so, how can it get refueled? Today’s report on initial weekly jobless claims didn’t offer much hope for sustained growth, plateauing at roughly the same level for the past several weeks. In fact, today’s number is within 10,000 of the new four-week average, while the level of new claims remains around four times as high as the pre-pandemic normal level.
The number of people getting continuing benefits still dropped, but nowhere near as dramatically as has been the case in the past two months (emphasis mine):
In the week ending September 19, the advance figure for seasonally adjusted initial claims was 870,000, an increase of 4,000 from the previous week’s revised level. The previous week’s level was revised up by 6,000 from 860,000 to 866,000. The 4-week moving average was 878,250, a decrease of 35,250 from the previous week’s revised average. The previous week’s average was revised up by 1,500 from 912,000 to 913,500.
The advance seasonally adjusted insured unemployment rate was 8.6 percent for the week ending September 12, a decrease of 0.1 percentage point from the previous week’s revised rate. The previous week’s rate was revised up by 0.1 from 8.6 to 8.7 percent. The advance number for seasonally adjusted insured unemployment during the week ending September 12 was 12,580,000, a decrease of 167,000 from the previous week’s revised level. The previous week’s level was revised up 119,000 from 12,628,000 to 12,747,000. The 4-week moving average was 13,040,750, a decrease of 478,000 from the previous week’s revised average. The previous week’s average was revised up by 29,750 from 13,489,000 to 13,518,750.
The high topline numbers had been mitigated by large declines, indicating improvement even while too-high churn in job markets continued. The last month or so, however, has seen the situation stall out, still at too-high levels but now with fewer people coming off benefits. Given other economic indicators, economists expected better this week, and so did investors:
Stock futures were lower on Thursday after weak economic data, set to add losses to what has been tough month on Wall Street.
Dow Jones Industrial Average futures dropped 200 points, or 0.7%. S&P 500 futures slid 0.9% and Nasdaq 100 futures were down by 1.4%.
Futures extended declines after U.S. weekly jobless claims came in worse than expected. First-time claims for state unemployment benefits totaled 870,000 for the week ending Sept. 19, higher than a Dow Jones estimate of 850,000. …
“Claims, arguable the most important high frequency data point currently, missed expectations and moved up week-over-week,” Evercore ISI strategist Dennis DeBusschere, said in a note Thursday. “With the Fed diminishing its own credibility by continually emphasizing the ineffectiveness of monetary policy and begging for fiscal support, weaker data will have a big impact on risk assets. Especially if the fiscal cliff starts to bite, which some indicators suggests might be starting.”
What has created the stall? The nation’s CEOs believe that inaction in Congress on a Phase 4 relief bill has a good deal to do with it. The economic recovery hasn’t reversed itself, they argue, but it will take many more months to pull out of the dive created by the pandemic shutdowns. Businesses of all sizes still need financial support from the government that forced them to close down, they argue:
More than a third of the group — whose members include the CEOs of Apple, JPMorgan Chase and Chevron — expect economic conditions to remain bumpy until 2022 or later. The poll, taken from Aug. 31 to Sept. 16, showed a gradual economic recovery from the pandemic, mirrored in the labor market, consumer spending and industrial production. But the findings highlight they don’t see the recovery reaching every sector soon, particularly small businesses.
Joshua Bolten, president and chief executive of Business Roundtable, said in the report that federal aid earlier in the pandemic for companies, small businesses and workers helped improve CEO outlook — but there’s more to be done.
“Further major support from the federal government is necessary to prevent economic recovery from being derailed,” Bolten said in a statement. “Failure to act, along with the lack of comprehensive and coordinated efforts to stop the spread of COVID-19, would impose long term damage on the U.S. economy, hurting most the workers and small businesses least able to absorb the blow.”
Will this create more pressure on Congress to get something accomplished? The last we saw, the Problem Solvers’ caucus proposal for a $1.5 trillion plan had gotten some support from the White House and Senate Republicans, and even House Democrats not named Nancy Pelosi. Pelosi seems to believe that she has the upper hand in this standoff and wants to force Trump and Mitch McConnell to agree to massive bailouts for state and local governments and a bill almost a trillion dollars higher than the Problem Solvers’ proposal. That seems unlikely; Republicans showed a willingness to move forward by a trillion already, and this compromise includes some state and local bloc grants too.
Until now, most of the House activity has focused on the continuing resolution. Now that the CR is complete, perhaps House Democrats will pressure Pelosi into embracing the compromise so that they can get back to campaigning. It might take a bad monthly report on economic metrics to make that happen, however, which would tend to suggest that we won’t see anything happen until mid-October at the earliest. Since Pelosi has refused to recess without a Phase 4 bill, that means House Democrats won’t have much time to defend their majority on the campaign trail.
