© Reuters. FILE PHOTO: A job seeker leaves a job fair to look for airport-related jobs at Logan International Airport in Boston, Massachusetts, U.S., December 7, 2021. REUTERS / Brian Snyder / File Photo
By Lucia Mutikani
WASHINGTON (Reuters) – The number of Americans filing claims for unemployment benefits was below pre-pandemic levels last week, while consumer spending surged, putting the economy on track to a strong end. in 2021.
But price pressures continue to mount, with the core inflation gauge posting its biggest annual gain since 1989 in November. Thursday’s reports come as the country struggles grappling with a resurgence of the COVID-19 infection, due to highly transmissible Delta and Omicron variants, which could stifle economic growth in the first quarter.
“Increased virus cases are a near-term risk but overall, we expect growth to pick up,” said Rubeela Farooqi, chief US economist at High Frequency Economics in White Plains, New York. in Q4 compared to a slower rate in Q3.”
State jobless claims were initially flat at 205,000 seasonally adjusted for the week ended December 18, the Labor Department said. Earlier this month, claims had dropped to levels last seen in 1969.
Economists polled by Reuters had forecast 205,000 applications in the latest week. Claims have fallen from a record high of 6,149 million in early April 2020.
Applications typically increase during the cold months, but severe labor shortages have disrupted that seasonal pattern, leading to lower seasonally adjusted applications in recent weeks.
Unadjusted claims fell sharply in Missouri and Pennsylvania, offsetting increases in California.
“Looking past that noise, however, we would expect claims to remain around 200,000 due to headcount,” said Nancy Vanden Houten, lead US economist at Oxford Economics in New York. layoffs remain low amid a tight labor market.”
“The spread of the Omicron variant could lead to increased risk to that forecast, but for now, it looks like businesses are trying to stay open.”
The claimed data covers the time period the government surveyed businesses for the nonfarm payrolls portion of the December jobs report.
Claims fell between the November and December survey periods, indicating an increase in employment this month. However, the labor shortage remains a challenge. There are hopeful signs that jobless Americans are beginning to return to the workforce, but soaring coronavirus infections could pose an obstacle.
The number of people continuing to receive benefits after the first week of aid fell by 8,000 to 1.859 million in the week ending December 11. This is the lowest level for so-called resume claims since mid-March. March 2020.
The labor market is tightening, with the unemployment rate at a 21-month low of 4.2%. There was a record 11.0 million jobs employed at the end of October.
Higher wages as companies scramble for scarce workers are helping to underpin consumer spending.
A separate report from the Commerce Department on Thursday showed that consumer spending, which accounts for more than two-thirds of US economic activity, rose 0.6 percent last month. Consumer spending rose 1.4% in October.
Services rose 0.9 percent, accounting for nearly all of the previous month’s increase in spending. The broad rise of services is led by housing and utilities.
Spending on goods increased 0.1% as spending on durable goods such as motor vehicles fell 0.6% reflecting shortages. Merchandise spending was also weaker after Americans started shopping early during the holiday season to avoid empty shelves.
Scarcity of goods is hindering the spending on equipment of businesses. A third report from the Commerce Department showed orders for non-defense capital goods, excluding aircraft, a closely watched representative of business spending plans, fell by zero. 1% last month. Orders for these so-called core capital goods rose 0.9 percent in October.
Inflation accelerated in November. The personal consumption expenditures (PCE) price index, which excludes volatile food and energy components, rose 0.5 percent after a similar increase in October.
In the 12 months through November, the so-called core PCE price index rose 4.7%. That was the biggest increase since February 1989 and followed a 4.2% year-on-year increase in October.
When adjusted for inflation, consumer spending was flat after rising 0.7% in October. Despite so-called real consumer spending being flat last month, economic growth is expected will increase rapidly in the fourth quarter.
Growth forecasts for the fourth quarter are as high as 7.2% annualized. The economy grew at a 2.3% rate in the third quarter. According to a Reuters survey of economists, it is expected to grow 5.6% this year, the fastest since 1984. The economy shrinks 3.4% in 2020.
But the outlook for next year is cloudy. COVID-19 infections are skyrocketing and President Joe Biden’s $1.75 trillion domestic investment bill, called Build Back Better, is intended to expand social safety nets and respond climate change, was dealt a blow on Sunday when moderate Democratic Senator Joe Manchin said he would not support it. That has prompted economists to cut their growth estimates for next year.