🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Stocks

U.S. labor market slowing; productivity strong in third quarter

Published 2020-11-05, 08:39 a/m
© Reuters. FILE PHOTO: A new business advertises for workers as it prepares to open up during the outbreak of the coronavirus disease in California,

By Lucia Mutikani

WASHINGTON (Reuters) - The number of Americans filing new claims for unemployment benefits fell only slightly last week, adding to signs that the economic recovery was losing steam as the COVID-19 pandemic intensifies and fiscal stimulus ends.

The economy could be plunged into a period of uncertainty following Tuesday's presidential election, potentially undermining business investment and delaying a much-needed second coronavirus relief package from the government.

Democrat Joe Biden edged closer to victory on Thursday, while President Donald Trump alleged fraud without providing evidence, filing lawsuits and calling for recounts in a race yet to be decided two days after polls closed.

Initial claims for state unemployment benefits fell 7,000 to a seasonally adjusted 751,000 for the week ended Oct. 31, the Labor Department said. Data for the prior week was revised to show 7,000 more applications received than previously reported.

Economists polled by Reuters had forecast 732,000 applications in the latest week.

The weekly unemployment claims report, the most timely data on the economy's health, followed on the heels of reports on Wednesday showing private payrolls increasing less than expected in October and activity in the services industry cooling.

With a swift fiscal package unlikely as politics take center-stage, the focus will shift to the Federal Reserve to pump more money into the economy. The U.S. central bank is expected to keep interest rates near zero when policymakers conclude a two-day policy meeting later on Thursday.

Unadjusted claims edged down 543 to 738,166 last week. Economists prefer the unadjusted number given earlier difficulties adjusting the claims data for seasonal fluctuations because of the economic shock caused by the pandemic. Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs, 1.1 million people filed claims last week.

Though first-time unemployment claims have dropped from a record 6.867 million in March, they remain perched above their 665,000 peak during the 2007-09 Great Recession.

More than $3 trillion in government pandemic relief for businesses and workers fueled a historic 33.1% annualized rate of economic growth in the third quarter. That followed a record 31.4% pace of contraction in the April-June quarter.

U.S. stocks opened higher as investors bet on a Republican held Senate that would block any moves by a Biden administration to tighten regulation and raise taxes. The dollar fell against a basket of currencies. U.S. Treasury prices were lower.

LACKLUSTER DEMAND

Lack of fiscal stimulus and spiraling new coronavirus infections across the country have put the economy on a sharply slower growth path heading into the fourth quarter.

The government's closely watched employment report on Friday is expected to show nonfarm payrolls increased by 600,000 jobs in October after rising 661,000 in September, according to a Reuters survey of economists. That would leave employment 10.1 million jobs below its peak in February.

The explosion in COVID-19 cases across the country and cooler weather is likely to weigh on already lackluster demand for services like air travel, hotel accommodation and gym memberships, and eating and drinking at restaurants and bars.

The services industry, which accounts for more than two-thirds of the U.S. economy, has been hardest hit by the pandemic, making it difficult to recoup all the 22.2 million jobs lost during the crisis.

Though the claims report showed a decline in the number of people on unemployment rolls in late October, that was partly because many people have exhausted their six months of benefits.

The number of people receiving benefits after an initial week of aid declined 538,000 to 7.285 million in the week ending Oct. 24. A total 3.961 million filed for extended unemployment benefits in the week ending Oct. 17. At least 21.5 million people were receiving unemployment benefits in mid-October.

In another report on Thursday, the Labor Department said nonfarm productivity, which measures hourly output per worker, increased at a 4.9% annualized rate last quarter. Productivity surged at a 10.6% rate in the second quarter, the fastest since the first quarter of 1971. It rose at a 4.1% rate compared to the third quarter of 2019.

Though productivity was likely overstated because of the pandemic, the two straight quarterly strong gains mirror a pattern seen during the 2007-09 recession when the recovery was not accompanied by strong employment growth.

© Reuters. FILE PHOTO: People line up outside Kentucky Career Center in Frankfort

The economy has recouped two-thirds of output lost during the COVID-19 pandemic, while just over half of the 22.2 million jobs that disappeared have been recovered. This suggests the jobs recovery could take much longer than after the 2007-09 downturn.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.