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(Bloomberg) – US consumer spending and income fell more than expected in November and unemployment claims remained at high levels last week, the latest signs that the fall spike in cases coronavirus disease undermines economic recovery.
Initial jobless claims in the state’s regular programs fell from 89,000 to 803,000 in the week ended Dec. 19, according to the Labor Department on Wednesday, compared to economists’ median projection of 880,000. On an unadjusted basis, claims decreased by approximately 73,000.
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A separate Commerce Department report showed consumer spending, which makes up the majority of the economy, fell 0.4% last month – the first drop since April. Personal income fell 1.1%, reflecting the end of several pandemic assistance programs.
Data shows a U.S. economy limping through the end of the year and suggests many Americans will struggle in the months to come as coronavirus cases increase across the country. More and more businesses are also facing closures or layoffs in a colder climate and less foot traffic.
Vaccine distribution offers hope on the horizon, and the fiscal stimulus package approved by Congress this week should offer some relief, although President Donald Trump’s remarks on Tuesday night call into question the fate of the agreement.
“The economy is still pretty soft,” said Scott Brown, chief economist at Raymond James Financial Inc. “The level of jobless claims suggests that there is still a weakness in the labor market,” while on the spending, “you see the impact of the pandemic on the season: There are fewer seasonal races than usual, there are fewer seasonal trips. “
Other reports on Wednesday showed new home sales unexpectedly fell to a five-month low, while consumer sentiment and a business investment indicator lagged behind expectations.
U.S. stocks edged up slightly as investors seemed prepared to look past the president’s comments on the promise of pandemic relief that will come sooner or later. Yields on 10-year Treasuries rose, while the dollar fell.
Beneficiaries of the advantages
Labor Department figures showed continued claims, which roughly approximate the total pool of state benefit recipients, declined from 170,000 to 5.34 million during the week ended Dec. 12. That figure does not include the millions of federal pandemic assistance programs to be extended under the new fiscal stimulus package.
Even with the drop in initial jobless claims, the level remains nearly quadrupled from what it was before the pandemic, and the four-week average edged up to a two-month high. California and New York accounted for most of the decline on an unadjusted basis.
More than half of the states reported a drop in initial claims, while Illinois, Virginia and Pennsylvania saw an increase in claims last week.
The drop in spending, which topped estimates from Bloomberg’s survey of economists, followed a downward revised 0.3% increase in October. Spending on goods fell 1%, on the strength of clothing, shoes and new motor vehicles. Spending on services declined due to the decline in food and accommodation services.
“We are losing momentum at a critical time,” Diane Swonk, chief economist at Grant Thornton in Chicago, told Bloomberg Television. “Consumer spending is slowing down or slowing down at a time when we should be increasing, and that’s because of the surge in Covid business.”
Also on Wednesday, data showed that US durable goods orders rose more than expected in November. But an indirect measure of business investment – orders for non-defense capital goods, excluding aircraft – rose 0.4%, less than the estimate of 0.6%, after an increase of 1.6% revised upwards in October.
The weekly jobless claims report is usually released on Thursday, but has been moved because the federal government will be closed on December 24.
(Adds data on new home sales, consumer sentiment.)
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