The U.S. economy’s ability to withstand layoffs and a renewed surge in coronavirus cases will become clearer on Thursday when the government reports the latest data on new claims for unemployment benefits.
After dropping in late spring and early summer as pandemic-related lockdowns eased, new claims for state jobless benefits have been steadily totaling about 800,000 a week, far above the level in previous recessions.
“The numbers are extremely worrisome, in my opinion, and they point to a labor market that is struggling to make progress,” said Gregory Daco, chief U.S. economist at Oxford Economics.
Despite widespread economic pain, Republicans and Democrats in Washington have been unable to agree on a new relief package, a failure that may cause the economy to slow further in the coming months. Federal benefits created in March to supplement state payments to the unemployed are set to expire by the end of the year.
The fresh data may show the impact from a wave of layoffs announced in recent weeks from companies like United Airlines and Allstate. Diane Swonk, chief economist at the accounting firm Grant Thornton, estimates that there have been 200,000 layoffs since the beginning of September.
“We really need the aid from Washington,” she said. “This is an economy that got into a deep hole, and it’s very hard to get out of. There is now a risk of deeper cuts and more permanent closures.”
Americans used one-time stimulus checks they received from the federal government early in the pandemic to pad their savings accounts and pay off debt, new research from the Federal Reserve shows.
Households spent just 29 percent of the money they received earlier this year, the Federal Reserve Bank of New York said in a post on its website, citing its Survey of Consumer Expectations, conducted in June and August. Another 36 percent of the cash was saved, while 35 percent was used to pay down debt.
Americans adults who qualified for the stimulus received up to $1,200 each, with an extra $500 added per child in the household. Out of the Fed’s sample, 89 percent of households received money.
Poorer families and those who lost jobs or income amid the pandemic were more likely to use their money to pay down debts, while richer families saved the money.
“The economic impact payments, by increasing both household income and the debt pay down, contributed importantly to the sharp increase in the overall saving rate during the early months of the pandemic,” the central bank’s researchers wrote in the post.
Several factors might have been behind the relatively low spending and high saving. People were unsure when the economic crisis would clear up, the researchers wrote, and might have been acting cautiously. They were on lockdown, which might have limited opportunities to spend, and some rent payments — which count as consumption — were delayed.
The trends seem unlikely to change if new aid becomes available: In the August survey, the New York Fed asked what households might do if they received another $1,500 check. Respondents expect to spend even less of that money, about 24 percent.
The newfound savings buffer cushioned the blow as expanded unemployment insurance expired. Consumer spending has held up even though millions remain unemployed but are no longer receiving an extra $600 per week from the federal government.
“We’re still benefiting from the stimulus,” Randal K. Quarles, vice chair for supervision at the Fed, said during an event on Wednesday, noting that it makes it harder to guess what will happen to the economy once that tailwind fades.