The American economy is showing fresh signs of deceleration, the New York Times said this week. It is being hammered by layoffs, a surge in coronavirus cases and the lack of fresh aid from Washington.
The article cited the Labor Department's Thursday report that 886,000 people filed new claims for unemployment benefits last week, an increase of nearly 77,000 from the previous week. Adjusted for seasonal variations, the total was 898,000.
The rise follows the announcement of layoffs by major companies, including Disney and United Airlines, in recent weeks and a continuing impasse between Republicans and Democrats over another round of aid for the economy. A recent jump in coronavirus infections, principally in the Midwest and Western states, only added to the grim outlook.
“It's discouraging,” Ian Shepherdson, chief economist at Pantheon Macroeconomics said. “The labor market appears to be stalled, which underscores the need for new stimulus as quickly as possible.”
The economy had rebounded strongly in late spring and early summer as lockdowns eased in many parts of the country and employers brought back workers from furloughs. But those recalls have slowed, even as federal stimulus efforts have waned.
In past recessions, 800,000 new claims for state unemployment insurance in a week would have been considered extraordinary. But over the last 30 weeks, that figure has become a floor, not a ceiling. The latest numbers “point to a lot of churn in the labor market, and it appears the rate of firings has picked up,” said Michael Gapen, chief U.S. economist at Barclays.
More layoffs are expected as sectors like leisure and hospitality are increasingly affected. In some states, restaurants have been able to salvage some business by serving diners outside but that option likely will disappear in many areas as winter approaches.
“The course of the virus determines the course of the economy,” said Diane Swonk, chief economist at the accounting firm Grant Thornton. “You can't fully reopen with the contagion so high” and as federal aid is waning.
A federal program set to expire at the end of the year, Pandemic Emergency Unemployment Compensation, is seeing a surge in new applications. It provides 13 weeks of extended benefits after the end of regular state payments, which typically last 26 weeks.
In the week that ended Sept. 26, the most recent period with available data, nearly 2.8 million people were getting the extended benefits, a jump from fewer than two million the previous week, the Times said. That increase was roughly equal to the decline in the number collecting state benefits.
But managing and overseeing those benefits, which are administered by the states, isn't so easy, experts say. “The transition from regular state benefits to P.E.U.C. is not going smoothly,” said Heidi Shierholz, senior economist and director of policy at the Economic Policy Institute, a left-leaning research group.
The Times examined in greater detail the cases of several workers and their responses to the economic pressures they face in struggling industrial sectors — and especially the tactics some workers who are caught between an unforgiving job market and uncertain prospects for help from the government have been able to use.
However, in some places, recipients of state unemployment benefits haven't been notified of their eligibility for the federal extension and aging computer systems have slowed the processing of applications. Thus, for workers facing the end of regular benefits, the extended payment programs have proven to be a lifeline which now appears increasingly threatened.
The Times article — along with many others — looked toward the end of the federal supports with growing concern. If it is not extended by Congress, “we're going to see a disaster,” Shierholz said. “There will be a huge drop in living standards and an increase in poverty as well as downward pressure on economic growth.”
So, we will see. Almost every economic analysis in recent months has observed that central aspects of the economic outlook depend crucially on the degree to which the coronavirus is controlled — even as the outbreak is increasingly virulent in a growing number of states. The result is increasing concern as anti-virus efforts are increasingly facing political confrontations and election fights intensify — trends producers should watch closely as the season progresses, Washington Insider believes.