First-time claims for unemployment insurance beat Wall Street estimates last week as the U.S. economy enters a critical new stage.
Filings totaled 860,000 for the week ended Sept. 12, the Labor Department reported Thursday. Economists surveyed by Dow Jones had expected 875,000, against the previous week’s upwardly revised 893,000.
The number represents a modest downshift in claims, which had hit a peak of 6.9 million in late March as the economy shut down to try to slow the coronavirus pandemic. Since then, the labor market has recovered though millions remain displaced from job closures associated with the virus measures.
The beat on claims had little impact on financial markets, with Wal Street still poised to open sharply lower.
Claims had remained above 1 million a week through late August. Earlier in September, the Labor Department changed the way it adjusted for seasonal factors to account better for the influence the virus measures have had on the economy.
The economy faces new challenges now after a summer of strong employment growth. Economists and healthcare professionals worry that a resurgence in Covid-19 cases could stall or reverse the gains the economy has seen in the past several months.
Another piece of good news was a decline in continuing claims, which fell 916,000 to 12.63 million. The four-week moving average for continuing claims dropped by 532,750 to 13.5 million.
Economists worry that the end of government assistance to unemployed workers that provided an extra $600 a week on top of what they normally would receive in benefits would exacerbate the problems in the jobs market. However, the pace of claims is continuing to fall, though the total still is considerably above anything the U.S. had seen pre-pandemic.
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The Federal Reserve kept its pledge to keep interest rates anchored near zero and pledged to keep rates there until inflation rises consistently.
As the central bank concluded its two-day policy meeting Wednesday, it said short-term rates would remain targeted at 0%-0.25%. Officials also changed their economic forecasts to reflect a smaller decline in GDP and a lower unemployment rate in 2020.
Projections from individual members also indicated that rates could stay anchored near zero through 2023. All but four members indicated they see zero rates through then. This was the first time the committee forecast its outlook for 2023.
The decision comes amid stronger economic data during the third quarter. Most economists see a sharp rebound for the U.S. after it plunged into recession in February, a month before the World Health Organization declared the coronavirus a pandemic.
Since then, the Fed has unloaded an unprecedented array of policy tools aimed at keeping markets functioning and the economy afloat. It initiated about a dozen lending and liquidity programs that have coincided with a massive rise in stocks and a steadying and in some cases major rise in economic indicators.
In addition, officials recently announced a new policy regime in which the Fed will allow inflation to run somewhat above the 2% target rate before hiking rates to control inflation.
The policymaking Federal Open Market Committee adopted specific language to emphasize the inflation goal.
“With inflation running persistently below this longer run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved,” the post-meeting statement said.
The committee added that “it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.”
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Former Federal Reserve Chairman Alan Greenspan said his biggest economic concerns in the U.S. are inflation and the budget deficit.
“My overall view is that the inflation outlook is unfortunately negative and that’s essentially the result of entitlements crowding out private investment and productivity growth,” Greenspan said in an interview Thursday on CNBC’s “Squawk on the Street.”
It was the first televised interview the “Maestro” has given since the coronavirus pandemic hit in March.
Speaking about the virus, Greenspan said, “We know very little so we pretend a great deal.”
On the budget deficit, he said the federal government’s spending imbalance is “getting out of hand.” Through July, the fiscal 2020 shortfall totaled $2.45 trillion, the byproduct of intensified government spending to get the economy through the pandemic-associated shutdown.
Greenspan has long bemoaned the additional shortfalls in major entitlement spending like Social Security, Medicaid and Medicare.
“We do have a great deal of knowledge on the extraordinary increase in the size of the retirement area,” he told CNBC. “We are if anything underestimating the size of the budget deficits that are down the road.”
As the U.S. has struggled with its fiscal problems, the Fed has kept interest rates low and most recently committed to bringing inflation up to its 2% goal. The Fed has indicated it will not raise rates even if inflation runs above the goal for a period of time and unemployment hits levels generally associated with higher cost pressure. Inflation has been running consistently below the 2% level for most of the past decade and more recently was closer to 1%.
Greenspan did not comment directly on the policy known as “average inflation targeting.”
“I don’t want to get involved and stick my nose in any of these things,” he said. “I think that so far from what I can judge things are going well there.”
Weekly jobless claims were worse than expected last week amid a plodding climb for the U.S. labor market from the damage inflicted by the coronavirus pandemic.
The Labor Department reported 884,000 first-time filings for unemployment insurance, compared to the 850,000 expected by economists surveyed by Dow Jones. The total was unchanged from the previous week.
Continuing claims from those filing for at least two weeks rose from the previous week, hitting 13.385 million, an increase of 93,000 from a week ago and an indicator that the strong jobs improvement through the summer may be tailing off entering the fall.
The Labor Department changed its methodology in how it seasonally adjusts the numbers, so the past two weeks’ totals are not directly comparable to the reports from earlier in the pandemic. Claims not adjusted for seasonal factors totaled 857,148, an increase of 20,140 from the previous week.
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Job openings rose 10% in July to a pandemic high even though the rate of hiring saw a sharp slump, according to a Labor Department report Wednesday.
The total for available positions hit 6.6 million for the month, above the 6 million expected from economists surveyed by FactSet. The estimate effectively would have been no change from the June total for the government’s Job Openings and Labor Turnover Survey, which runs a month behind the department’s nonfarm payrolls count.
The openings rate increased from 4.2% to 4.5%, just below the 4.6% level from a year ago.
While job openings surged, the actual hires tumbled from just shy of 7 million in June to 5.8 million in July, a decline of more than 20%. The hiring rate as a share of the workforce fell from 5.1% to 4.1%. Though that was a considerable decline, it was just ahead of the 4% level a year ago.
The jobs market has been making a gradual recovery since the economic shutdown associated with containing the coronavirus. Nonfarm payrolls have increased by 10.6 million since May, reversing about half the damage inflicted by the shutdown. The drop in the hiring rate was consistent with the deceleration in payroll growth, from 4.78 million in June to 1.73 million in July.
Prior to the pandemic declaration in March, job openings were at 7 million while hirings were around 5.9 million.
Economists and Federal Reserve policymakers watch the JOLTS report for clues about labor slack and how quickly companies are trying to fill open positions.
Separations increased marginally in June to 5 million while quits, which are seen as a sign of labor confidence from those leaving their present jobs, rose 13.2% to 2.95 million. The quits rate increased 0.2 percentage points to 2.1%, while the layoffs rate fell from 1.4% to 1.2%.
U.S. President Donald Trump listens to a question during a news conference at the White House in Washington, September 4, 2020.
Leah Millis | Reuters
President Donald Trump predicted a sharp economic rebound next year and said Monday the U.S. is “rounding the final turn” on the coronavirus pandemic.
Speaking to reporters from the North Portico of White House, Trump touted the most recent nonfarm payrolls report that showed a sharp drop in the unemployment rate and said that if he is not re-elected, the pandemic rebound will come to a halt.
“We’re currently witnessing the fastest labor market recovery from an economic crisis in history,” he said. “Next year will be the greatest economic year in the history our country, I project.”
Trump spoke three days after the Labor Department reported creation of nearly 1.4 million jobs in August and a slide in the unemployment rate from 10.2% in July to 8.4%. About half the jobs lost during the pandemic have been recovered, though economists and health experts worry that a Covid-19 resurgence in the fall and winter could stunt those gains.
However, Trump said the economy is recoverin in a V shape, “probably a super V,” and noted recent record-breaking moves in the stock market.
He also offered encouragement about the progress towards a vaccine, saying one is possible as early as October, though there’s no evidence to suggest that is likely at this point. Trump painted the U.S. as “a leader in every way” compared with other countries when it comes to containing the virus.
“We’ve done an incredible job at speeds like nobody has ever seen before,” he said. “This could have taken two or three years. Instead, it’s being done in a very short period of time. We could even have [a vaccine] in the month of October.”
The U.S has seen nearly 890,000 Covid-19 cases and 189,028 deaths, according to tracking from Johns Hopkins University. The 5-day moving average for cases is 40,714, well above where it was in the spring but below the peak of 69,451 in mid-July.
Along with his thoughts on the economy and virus, the president lobbed persistent criticism at his November election opponent, former Vice President Joe Biden.
“If Joe Biden becomes president, China will own the United States, and every other country will be smiling as well,” Trump said.
Trump also entertained the idea of “decoupling” from China, or refusing to do business with the nation. “There’s been no country anywhere at anytime that’s ripped us off like China dones.”
Federal Reserve Chairman Jerome Powell, wearing a face mask, testifies before the House of Representatives Financial Services Committee during a hearing on oversight of the Treasury Department and Federal Reserve response to the outbreak of the coronavirus disease (COVID-19), on Capitol Hill in Washington, U.S., June 30, 2020.
Tasos Katopodis | Reuters
Interest rates are likely to stay low for years as the economy fights its way back from the coronavirus pandemic, Federal Reserve Chairman Jerome Powell said in remarks published Friday afternoon.
“We think that the economy’s going to need low interest rates, which support economic activity, for an extended period of time,” Powell told NPR in an interview after the nonfarm payrolls report was released earlier in the day. “It will be measured in years.”
The statement aligns with comments from Powell and other Fed officials over the past week or so.
In a major change to its approach to monetary policy, the central bank now has set a stated directive that inflation will be allowed to float above the Fed’s 2% target for a period time after running below, as has been the case for most of the past decade.
The move effectively means that the Fed no longer will hike rates in order to head off inflation that historically had come with lower unemployment rates.
Powell called the Friday jobs repot “a good one.” Nonfarm payrolls rose by 1.37 million and the unemployment rate slid to 8.4%, still higher than anything since the early days of the financial crisis recovery but a good deal better than the pandemic peak of 14.7%.
Powell again tied the progress of the economy to the coronavirus, and he encouraged following safety guidelines like wearing masks and maintaining social distancing.
“There’s actually enormous economic gains to be had nationwide from people wearing masks and keeping their distance,” he said.
Job creation in August represents continued improvement in the U.S. economy but a full recovery won’t happen until the coronavirus pandemic is under control, Boston Federal Reserve President Eric Rosengren said Friday.
Unemployment fell to 8.4% as nonfarm payrolls rose by 13.7 million last month, the Labor Department reported, in numbers that were significantly better than Wall Street expectations. The jobless rate decline was particularly pronounced, sliding 1.8 percentage points from its July level as the labor market continues to heal.
While Rosengren acknowledged the “significant improvement,” he said the economy remains under pressure.
“We have a long way to go before we are fully recovered, but I will say this employment report was a very positive one,” he told CNBC’s Steve Liesman during an interview on “The Exchange.”
He noted that many of the gains were in the retail and hospitality sectors, both areas hard-hit during the pandemic as shoppers and diners stayed home due to government-imposed restrictions aimed at controlling the coronavirus spread.
Those areas have a long way to go before they are back to pre-pandemic levels, Rosengren added.
“At 8.4% unemployment, that is a very significant recession and I do think that it’s going to take quite a while to bring all those people back, particularly if it takes us a long time not only to get the pandemic resolved but also to get a workable and safe vaccine that is widely distributed,” he said. “I think it really is going to take that before we see a completely normalized market.”
For its part, the Fed has tried to boost the recovery through anchoring short-term interest rates near zero and implementing a slew of lending and liquidity programs. In addition, officials recently have outlined a new approach to inflation that effectively will keep rates pinned low until unemployment falls well below current levels.
Some market participants are expecting the Fed to further cement its position by outlining specific metrics it will need to see before raising rates. However, Rosengren said that’s not likely at least in the near future.
“We already are doing quite a lot in terms of stimulating the economy,” he said. “I think we’ll have to consider what’s appropriate forward guidance, but I think at this point the market understands that we’re not planning on raising rates anytime soon.”
Nonfarm payrolls increased by 1.37 million in August and the unemployment rate tumbled to 8.4% as the U.S. economy continued to climb its way out of the pandemic downturn.
The unemployment rate was by far the lowest since the coronavirus shutdown in March, according to Labor Department figures released Friday.
Economists surveyed by Dow Jones had been expecting growth of 1.32 million and the jobless rate to decline to 9.8% from 10.2% in July.
Government hiring helped boost the total, with the growth of 344,000 workers accounting for a quarter of the monthly gain. Most of that hiring came from Census workers, whose tolls increased by 328,000. Despite worries of a revenue crunch among at the municipal level, local government employment rose by 95,000.
The total of those on furlough also fell dramatically. There were 24.2 million people who said they not working because their employer either closed or lost business due to the pandemic, down from 31.3 million in July.
The report comes amid a raft of mostly positive economic signals, with retail sales, real estate and manufacturing showing sharp rebounds off their coronavirus lows. Still, economists worry that absent another round of stimulus from Congress, the boosts in activity could be short-lived. August’s job gains mean that more than half of those displaced during the pandemic are back at work.
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