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© Reuters. FILE PHOTO: FILE PHOTO: The Spread of Coronavirus Disease (COVID-19), at Fort SmithBy Lucia Mutikani
WASHINGTON (Reuters) – Millions more Americans filed claims for unemployment benefits last week, suggesting that the layoffs spread to industries that were not directly affected by the closing of businesses and disruptions related to the new coronavirus.
Other data on Thursday showed a record collapse in consumer spending in March as the economy faltered due to blockades nationwide to curb the spread of COVID-19, the respiratory illness caused by the virus. The reports came shortly after news Wednesday that the economy suffered its biggest contraction since the Great Recession in the first quarter, ending the longest expansion in the history of the United States.
The deluge of grim economic figures deprives President Donald Trump of a success story to campaign while seeking re-election in November, and could increase criticism of the White House’s slow initial response to the pandemic.
“The economy continues to print numbers that scare everyone in the world,” said Chris Rupkey, chief economist at MUFG in New York.
Initial claims for state unemployment benefits totaled 3.839 million seasonally adjusted for the week ending April 25, the Labor Department said. While that decreased from $ 4,442 million in the prior week and marked the fourth consecutive weekly drop in applications, the numbers are still at unimaginable levels just a few months ago. Economists polled by Reuters had expected 3.50 million claims in the past week.
Claims for unemployment benefits hit a record $ 6,867 million in the week ending March 28. Last week’s claims brought the number of people applying for unemployment benefits to 30.3 million since March 21, which is equivalent to nearly one in five workers losing their job in just over a year. one month. At least 10 million people who have filed claims must still get benefits.
“The first wave was dominated by displaced leisure and hospitality workers, medical and dental office workers and general administrative positions,” said Mark Vitner, senior economist at Wells Fargo (NYSE 🙂 Stocks in Charlotte, North Carolina. “Most of the most recent job losses are likely to have been in manufacturing, logistics and professional services.”
Shares on Wall Street were trading lower. The dollar fell against a basket of coins, while US Treasury prices. USA They went up.
SKY-ROCKETING UNEMPLOYMENT
The claims report also showed that the number of people who received benefits after an initial week of aid increased from 2,174 million to 17,992 million in the week ending April 18.
So-called continuous claims data is reported with a delay of one week and will be closely watched in the coming months to get a better idea of the depth of the labor market recession. Ongoing claims peaked at 6.6 million in the last recession.
Continuous claims data covered the period during which the government surveyed households to determine the April unemployment rate. At face value, the rising unemployment rate implies a jump in the unemployment rate above 15% in April.
However, economists say this is unlikely due to the nature of job losses during blockades. The government has allowed people temporarily unemployed for COVID-19 related reasons to apply for unemployment benefits.
This includes those who are quarantined with the expectation of returning to work, as well as people who leave the job due to a risk of exposure or infection or to care for a family member.
However, according to the Labor Department’s Bureau of Labor Statistics, which compiles the closely watched monthly employment report, a person is defined as unemployed if they don’t have a job and have actively sought work in the past four weeks, and is currently available. for work.
“That means that many workers who lose their jobs as a result of the virus will be counted as abandoned from the workforce rather than unemployed,” said Heidi Shierholz, former chief economist at the Labor Department, and now head of policy at the Institute for Economic Policy. from Washington.
Still, economists expect the unemployment rate in April to break the post-World War II record of 10.8% reached in November 1982. In March, the unemployment rate shot up 0.9 percentage points, the largest monthly change since January. from 1975, to 4.4%.
The government will publish the April employment report next Friday.
In a separate report on Thursday, the Commerce Department said consumer spending, which accounts for more than two-thirds of US economic activity, fell a record 7.5% last month.
Spending was ironically reduced by a drop in health care outlays when dental offices closed and hospitals postponed elective surgeries and non-emergency visits to focus on patients with COVID-19. Spending increased 0.2% in February.
Monthly inflation was subdued in March, with the Personal Consumption Expense Price Index (PCE) excluding volatile food and energy components falling 0.1%.
That was the weakest reading since March 2017 and followed a 0.2% increase in February. In the 12 months to March, the so-called PCE basic price index increased 1.7% after increasing 1.8% in February. The base PCE index is the Federal Reserve’s preferred measure of inflation for the US central bank’s 2% target. USA
When adjusted for inflation, consumer spending fell a record 7.3% in March, putting consumption on a considerably lower path toward the second quarter. Economists predict a record collapse in consumer spending, with estimates for GDP declines ranging from a 20% rate to a 40% rate.
The economy contracted at an annualized rate of 4.8% in the first quarter, the fastest rate of GDP contraction since the fourth quarter of 2008, after expanding at a rate of 2.1% in the fourth quarter. Consumer spending fell at a rate of 7.6%, the largest decline since the second quarter of 1980, after growing at a rate of 1.8% in the October-December period.
Personal income fell 2.0% in March, the most since January 2013, reflecting a decrease in compensation.
Americans who are still employed saved cash, increasing the savings rate to 13.1%, the highest since November 1981, from 8.0% in February.
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