Other data on Thursday showed layoffs revealed by US companies in December decreased by 18.9 percent. Besides that, after the government approved additional pandemic relief in late December, the economy is unlikely to fall back into recession.
Last week, the number of Americans claiming first-time applications for unemployment insurance suddenly dropped while remaining exceptionally high, with the recovery in the labor market continuing to stall as a raging Covid-19 pandemic continues to overpower the nation.
Other data on Thursday showed layoffs announced by US companies surged 18.9% in December. Still, the economy is unlikely to slide back into recession after the government approved additional pandemic relief in late December.
More fiscal stimulus is probable. On Wednesday, Democrats finished a sweep of the two Senate seats up for grabs in runoff elections in Georgia, handing the chamber leadership of the party and enhancing the possibilities for the legislative agenda of President-elect Joe Biden. Congress formally recognized Biden’s election win hours Thursday after hundreds of supporters of President Donald Trump stormed the U.S. Capitol.
Gus Faucher (chief economist at PNC Financial in Pittsburgh, Pennsylvania) said, “Given that coronavirus caseloads remain extremely high and are set to rise in the near term due to holiday travel and parties, the labor market will remain soft over the next few months.”
The Labor Department said that initial estimates for state unemployment insurance declined 3,000 to a seasonally adjusted 787,000 for the week ended Jan. 2, relative to 790,000 in the previous week. In the past week, economists polled by Reuters had predicted 800,000 applications.
Claims were probably held back by challenges in adjusting the data at this time of year for seasonal variations. Last week, unadjusted assertions jumped 77,400 to 922,072. 1.08 million people filed claims last week, including a government-funded initiative for the self-employed, gig employees and those who do not qualify for the normal state unemployment services.
Elevated claims are in line with other data that recommended that due to the pandemic, the economy was taking a huge hit from business constraints and reductions in consumer spending. Minutes of the Dec. 15-16 meeting of the Federal Reserve released on wednesday demonstrates that policymakers anticipated that soaring cases of coronavirus “would be especially difficult for the labor market in the coming months.”
According to the US Centers for Disease Control and Prevention, Covid-19 cases in the United States have hopped to more than 21 million, with the death toll surpassing 356,000 since the virus first appeared in China in late 2019.
Global outplacement firm Challenger, Gray & Christmas said the US company confirmed 77,030 job cuts in December in a different report on Thursday, up from 64,797 in November. That managed to bring total layoffs to a record 2.305 million in 2020, a jump of 289 percent as compared to 2019. The pandemic accounted for more than half of the job cuts.
On Wednesday, a report revealed private companies remove workers for the first time in eight months in December. Compared to November, data from Homebase, a payroll staffing and monitoring company, demonstrates a steep decline in the number of employees working in December. The reports raised the risk of the economy losing jobs in December, while this week’s study revealed factory jobs bouncing back last month.
As investors bet on more pandemic support under a Democrat-controlled Congress, US stocks got confirmation. The dollar rose against the currency basket. Prices for the US Treasury were lower.
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