James Walton, Director of Inventory and Warehouse for Helping Harvest, transports a box of food to a car, in Reading, Pennsylvania, May 29, 2020.
Ben Hasty | Reading Eagle | Getty Images
A jump in jobless claims back above 1 million could be a warning that the labor market is facing a counterattack and the comeback of the economy may slow down.
Economists said the reason for the rise back to 1.1 million claims in the week of August 15, from the previous week of a revised 971,000 was unclear, but some say the economy needs more stimulus to play handball. A new fiscal incentive package has been halted in Congress because Democrats and Republicans disagree on how much to spend to help the economy and millions of unemployed Americans.
“If we continue to turn back and nothing is done by Washington, even for state and local government, the gusts of wind that go after the fall will be enormous and they could easily be a rip-off that pulls us down again,” he said. Diane Swonk, Chief Economist at Grant Thornton.
The number of new unemployment benefit claims had dropped in the previous two weeks, which coincided with the end of a $ 600 weekly federal incentive check to supplement unemployment benefits. Some economists had seen the decline in claims as a sign that some of the unemployed were returning to jobs due to the loss of that added benefit.
The number of individuals claiming more than one week of benefits continued to decline, declining from 636,000 to 14.84 million, in the week ending August 8. The series for continuous claim data is delayed by one week.
“[Claims] were in 36 states, “Swonk said.” What we are seeing is reinforcing that not only is the economy stopping, but it could be losing ground. “
The $ 600 weekly supplement for the unemployed has become a political football because House Democrats and Republicans of the House of Representatives and the White House do not agree on how big another incentive package should be. Democrats want to keep the $ 600-a-week payout, while the Senate proposes a $ 200 payout instead.
The White House has meanwhile authorized $ 300 a week for individuals from FEMA funds, plus asked states to come up with an additional $ 100. States process the funds individually, so it is unclear how quickly checks will reach many of the unemployed.
“The tax numbers have been twisted for several months in my opinion. It does not give us a great lecture on the labor market,” said Stephen Stanley, an economist at Amherst Pierpont. “I’m reluctant to draw too much from these figures. We’re still seeing very good gains through July. I think the August payout number will be positive, but smaller than July. I don’t think the mini-lockdowns will do that.” “It happened in June that had a big impact on employment.”
The economy added 1.8 million jobs in July. In addition to the 14.8 million people currently receiving state benefits today, August 8, there were another 11.2 million people who received benefits from the federal Pandemic Unemployment Assistance Program on August 1.
“Maybe things are not quite as good as we thought. It’s been a few weeks since the $ 600 weekly unemployment checks were gone. That’s the support from the economic recovery … There’s certainly no PPP anymore. The $ “1,200 checks are long gone. This is not a self-sustaining recovery,” said Chris Rupkey, chief economist at MUFG Union Bank. “We still need the support of the federal government, and that support has been withdrawn.”
Rupkey said this week’s data is difficult to read. “It just tells you that there’s a real question mark over what’s going on here in the month of August, and it does not look good. All the federal incentive money was May, June, July and it’s round, and maye this is the first sign the economy is not ‘In okay’, and spending will fall in the second half of the third quarter. It may be a 25% gain in real GDP in the third quarter, but it will go out on a soft note. “
Economists said the lack of new relief for small businesses through the Paycheck Protection Program, or PPP, may also be a factor in increasing claims, as that program is designed to encourage employers to retain employees. “Allowing a second bite of the apple for certain companies in the PPP makes a lot of sense,” Stanley said, noting that the initial program was created when it was expected that the virus would now be running its course.
The impact of the stimulus is difficult to measure. Some other data have shown improvement, such as the pickup in measures for inflation and a sharp recovery in retail spending to a level better than last year.
The Walmart financial officer said this week that the stimulus funds in the hands of consumers were clearly a factor in second-quarter sales, and that spending was tapered off as a stimulus on round.
“Stimulus was definitely impacting consumers in the second quarter, and we’re looking at what’s happening in Washington, and how we’re progressing with a new incentive package,” said Walmart CFO Brett Biggs. “I think for sure it would be useful for consumers.”
Congress is expected to eventually agree to an incentive package, but some economists fear that handball will suffer more in the economy if it comes too slowly. A new package will be expected to include another one-off payment to individuals and families, and states and local governments are also hoping for some relief because they have budget constraints.
Gus Faucher, chief economist at PNC, said he thought the economic shutdowns had more to do with the rise in claims, but if there is no new stimulus action, the economy will hurt.
“The loss of benefits, the reduction of household income by about $ 700 billion a month, could be a drag on the recovery, as some consumers are forced to cut back on their spending. An inability of Congress and the Trump administration to Voting appropriate additional incentives is a detrimental risk to PNC’s forecast of a solid economic recovery through the remainder of 2020 and into all of 2021, ”he wrote in a note.
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