Once again, the unemployment claims numbers showed economic destruction from the pandemic.
New claims surprised labor market observers with another higher-than-expected number of new people filing for unemployment claims — 885,000 people, higher than last week’s revised number of 862,00.
This is still around four times higher than pre-pandemic jobless claims, and economists see the recent trends deteriorating.
“Jobless claims are bad, and worse than they look,” wrote Pantheon economist Ian Shepherdson. “That’s because seasonal pressures pointed to a clear drop in claims this week, so the increase suggests that the underlying trend is now rising rapidly, as Covid restrictions force services sector businesses to reduce staff numbers.”
The latest coronavirus surge has continued to see over 240,000 new cases and over 3,600 people dying per day — horrifying numbers that put the total death count at 308,000.
Though the vaccine’s arrival is cause for optimism, the current near-term outlook is grim. Shepherdson expects new weekly unemployment claims to hit over 1 million in early January — as much as 1.25 million. These are levels last seen in mid-August.
"Continuing claims have now flattened and will follow initial claims back up,” wrote Shepherdson. “The path of Covid and the state of the economy cannot be separated.”
Indeed.com economist AnnElizabeth Konkel wrote that the uptick is "alarming in its own right," but that expiring programs to support unemployed Americans means that a very hard winter is on its way — unless Congress does something.
“Without Congressional action, millions are set to lose unemployment benefits the day after Christmas,” Konkel wrote in a note Thursday. “With many struggling to just keep the lights on, the programs’ mid-winter expiration date only worsens the situation.”
Konkel noted that this could have knock-on effects for the potential consumption boom that some see as the vaccine gives society the upper hand against the virus. The expiration of benefits may push down consumer spending and hurt business revenue.
This “general downward spiral,” Konkel wrote, “ hurts hiring and could mean further rounds of layoffs.”
Konkel and others say that Congressional action or a lack thereof — and cold weather for businesses that rely on outdoor seating — underscore the difficulty to come for millions of people, even with the vaccine on the way.
Looking farther out, bullishness and optimism abound as good news from Pfizer and Moderna trickle in and the light at the end of the tunnel emerges. But “vaccinations starting won’t immediately reverse the massive labor market damage at hand,” Konkel wrote.