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The impact of covid surge on jobless claims

Yahoo Finance’s Emily McCormick joins Zack Guzman and Akiko Fujita to discuss the coronavirus’ impact on jobless claims and the latest on the impact of PPP loans.

Video Transcript

ZACK GUZMAN: And I also want to spotlight the fact that, of course, a lot of this was focused around stimulus checks. But when we think about the additional stimulus that did come through in the latest bill, that did include a backstop in time to prevent millions of Americans from losing their unemployment benefits there. Of course, we're going to get the update in terms of the latest jobless claims numbers.

And for a preview on that, I want to get to Yahoo Finance's Emily McCormick, who has the details around that. And Emily, I mean, there is a silver lining there, when we think about how many people were still on the pandemic relief assistance programs here as a backstop, kind of a last case to tap into. Luckily, that seems to be uninterrupted.

EMILY MCCORMICK: That's right, Zack. And just to highlight, a Labor Department spokesperson did tell me in an email today that the department does not anticipate that there will be a pause ineligible claimants actually being able to receive their benefits under Pandemic Unemployment Assistance or the Pandemic Emergency Unemployment Compensation program. So that is really important here when we think about the labor market's ongoing recovery.

There have been some 14 million Americans claiming benefits between those two programs as of last week's data. And that had comprised the majority of the more than 20 million Americans claiming benefits across all programs. But as we look ahead to tomorrow's jobless claims report, of course, this is going to be one of the only major economic data reports that we get during this holiday-shortened week. And it is expected to still show a pretty strained picture of the labor market.

Economists are looking for initial jobless claims to have actually risen to 833,000, up from the 803,000 that we saw during the previous week for those new claims. Now and that would be the third time in four weeks that we see an increase in new claims. It would also be, again, another time in December that we're seeing the new jobless claims come in above that 800,000 level after actually breaking below that for some of November. And then, of course, starting to tick back up as we had those new COVID-19 cases and new restrictions come into play.

And then turning to the continuing claims side, which of course, measures the entire number of people still claiming state unemployment benefits, that's actually also expected to increase to nearly 5.4 million. That would be up from the 5.34 million that we saw during the previous week. So again, Zack. Just taking a look at the labor market here, still seeing a lot of signs of strain.

Of course, this data, since it captures last week, will not include any of the impacts of Congress's new $900 billion stimulus package. Although going forward, given that there will be those enhanced federal unemployment benefits, as well as that replenishment of loans under the Paycheck Protection Program, it's possible that we might start to see these claims come back down in the new year, as small businesses are able to keep more of their workforce on payrolls.

AKIKO FUJITA: Emily, that just sets up my question there, because that is still the big question mark, is how significant the impact from that $900 billion package is going to be. We had a small restaurant owner on earlier this week who said that the next round of PPP will be absolutely critical, because it comes during the winter months when they're not able to keep outdoor dining. Nobody wants to sit outside in the cold, especially in some of these Colder states. What are you hearing in terms of the impact this is likely to have on some of those businesses, especially the small businesses who need that access to these loans?

EMILY MCCORMICK: That's right, Akiko. And what I'm hearing from multiple economists, is that this more than $300 billion that's going towards small businesses out of that $900 billion stimulus package, is really going to be key. It could not come soon enough. And even the delay that we saw actually had driven, of course, up the new jobless claims that we've seen over the month of December.

We saw the lapse in these programs or really the dwindling of the programs push personal income, as well as personal spending down in the month of November. So all of these measures are going to be absolutely critical. Just taking a look at those enhanced unemployment benefits and the extension of those pandemic unemployment assistance and pandemic emergency unemployment compensation programs, those are, of course, actually going to expire again in March.

So it's possible that there may even need to be more done to really help bridge that gap even further heading into the summer and really the number of months that it's going to take to get enough Americans vaccinated so that we can have that long freestanding economic recovery. So again, this is going to be critical here for the small business side of the economy. But we'll see how long this lasts heading through the winter months.

ZACK GUZMAN: Man, another reason as to why those Georgia Senate runoff races are so important here, considering control here, divided government. We've seen how these stimulus negotiations have played out. It would be a very different story if President-elect Joe Biden had both Democratic Congress and Senate there to work with. But Emily McCormick, appreciate you bringing us that.