US economy sees good end of 2021 as labor market tightens and spending picks up


  • Weekly jobless claims drop from 71,000 to 199,000
  • Continuing claims drop from 60,000 to 2,049 million
  • Consumer spending increases 1.3% in October
  • GDP growth in the third quarter revised to 2.1%

WASHINGTON, Nov. 24 (Reuters) – The number of Americans filing new jobless claims fell to its lowest level in 52 years last week, suggesting economic activity accelerated as a year ravaged by shortages, high inflation and a relentless pandemic is drawing to a close.

The drop in claims reported by the Labor Ministry on Wednesday, however, was exaggerated by the difficulties in adjusting the data to seasonal fluctuations at this time of year. Still, the job market is tightening, with the number of unemployed falling in mid-November to the lowest since March 2020, when the economy was in the throes of the first wave of COVID-19 infections.

The strengthening economy was confirmed by other data showing strong consumer spending in October as well as business orders for equipment, excluding transportation. The merchandise trade deficit narrowed sharply last month as exports soared.

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But prices have remained stubbornly high, with annual inflation rising the most in nearly 31 years. The strong set of reports ahead of Thursday’s Thanksgiving holiday prompted economists to increase their growth estimates for the fourth quarter to an annualized rate of 8.6%.

“There may be some seasonal adjustment issues, but the writing is on the wall and all the anecdotal reports about how businesses can’t find the help they need are true,” said Christopher Rupkey. , chief economist at FWDBONDS in New York.

“The economy will end the year on a high note, there is a lot to thank.”

Initial claims for state unemployment benefits fell from 71,000 to 199,000 seasonally adjusted for the week ended November 20, the lowest level since mid-November 1969.

Economists polled by Reuters had forecast 260,000 candidates for last week.

Unadjusted claims rose from 18,187 to 258,622 last week amid an increase in Virginia, which offset declines in California, Kentucky and Missouri. More volatility is likely during the holiday season.

“The string of claims can be noisy and especially choppy during holidays like Thanksgiving when seasonal factors anticipate large swings in the underlying data,” said Daniel Silver, economist at JPMorgan in New York City. “But even so, initial claims fell by over half a million in the year through November 20, both before and after the seasonal adjustment.”

Claims have declined from a record 6.149 million at the start of April 2020 and are now considered compatible with a healthy labor market, although a severe shortage of workers caused by the pandemic is hampering faster growth in the use.

But there is hope for the expansion of the labor pool. The number of people continuing to receive benefits after a first week of aid fell from 60,000 to 2,049 million in the week ended Nov. 13, a 20-month low, according to the claims report.

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There were 10.4 million vacancies at the end of September. The workforce has shrunk by 3 million people from its pre-pandemic level, even as generous federally funded benefits expired, schools reopened for in-person learning and companies raise wages.

Stocks on Wall Street fell. The dollar appreciated against a basket of currencies. US Treasury prices have gone up.

BRIGHTENING THE IMAGE

People line up outside a recently reopened career center for in-person appointments in Louisville, United States, April 15, 2021. REUTERS / Amira Karaoud / File Photo

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Signs the economy was picking up momentum after hitting a slowdown in the July-September quarter as coronavirus cases erupted over the summer and shortages became widespread could cause the Federal Reserve to quickly end its bond purchase program.

Indeed, the minutes of the US central bank’s policy meeting on November 2-3, released on Wednesday, showed that some Fed officials would be willing to do so. Read more

“We are seeing the Fed accelerate its cut in January to pave the way for a rate take-off in September,” said Lydia Boussour, chief US economist at Oxford Economics in New York.

A separate Commerce Department report released Wednesday showed gross domestic product rose 2.1% in the third quarter. This was a slight upward revision from the 2.0% pace estimated in October, but remained the slowest in more than a year. The economy grew at a rate of 6.7% in the second quarter.

But it’s all in the rearview mirror. A third Commerce Department report showed consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 1.3% in October after increasing 0.6% in September.

Consumers, buoyed by rising wages and massive savings, bought motor vehicles and traveled, showing no signs of slowing down due to high inflation.

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The simultaneous recovery of global economies from the pandemic, fueled by trillions of dollars in financial assistance from governments, strained supply chains, sparking inflation.

President Joe Biden announced on Tuesday that the United States will release 50 million barrels of crude from the US Strategic Oil Reserve to help cool oil prices, in coordination with China, India, South Korea, Japan and Great Britain.

The personal consumption expenditure (PCE) price index, excluding the volatile components of food and energy, rose 0.4% last month after gaining 0.2% in September. In the 12 months to October, the so-called core PCE price index accelerated by 4.1%. This was the largest gain since January 1991 and followed a 3.7% year-on-year increase in September.

The core PCE price index is the Fed’s preferred inflation measure for its flexible 2% target. Read more

Adjusted for inflation, consumer spending rose a solid 0.7%.

In another boost to the economy, orders for non-military capital goods excluding aircraft, a close indicator of business spending plans, rose 0.6% last month, a the Commerce Department said in a fourth report. Read more

With corporate profits reaching an all-time high in the last quarter, businesses are expected to keep spending.

More goods were exported in October, sharply reducing the goods trade deficit by 14.6% to $ 82.9 billion. If the trend continues, trade could contribute to GDP growth this quarter.

Wholesalers continued to replenish their stocks last month, even as motor vehicle shortages hampered retailers’ progress, according to a fifth report.

Inventory build-up, the main driver of GDP growth in the last quarter, will likely continue to support the economy. The heavy flow of data led the Atlanta Fed to raise its estimate of fourth-quarter GDP growth to 8.6%, from 8.2%. JPMorgan increased its forecast to 7.0% from 5.0%.

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Reporting by Lucia Mutikani; Editing by Paul Simao, Chizu Nomiyama and Andrea Ricci

Our Standards: The Thomson Reuters Trust Principles.

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