OCTOBER 19, 2020 – MIXED DATA RELEASED; JOBLESS CLAIMS AND RETAIL SPENDING BOTH RISE
Last week, initial filings for jobless claims rose to the highest level since August 22 at 898,000, up 53,000 from a week earlier. The labor market continues to struggle as the recovery is slow to take hold. Yet retail sales, the US economy’s biggest driver, rose 1.9 percent in September, up from 0.6 percent in August.
There are worries that a renewed wave of coronavirus cases in the fall and winter will lead to temporary shutdowns adversely impacting the labor market. The economy has recovered 11.4 million jobs since March, about half of those lost; the unemployment rate has dropped below 8%, but it’s still more than double the pre-pandemic levels, with continuing claims falling sharply last week to just over 10 million. Robust rehiring in September created some optimism and should continue into the fourth quarter.
Consumers drive close to two-thirds of US economic activity and they stopped spending in Q2 when GDP fell 31.4%. A jump in spending last month is a positive sign as consumers loosen their pocketbooks. Economists are hopeful for a strong third-quarter GDP increase; the results will be released at the end of the month. The Atlanta Fed is predicting a 35.2% increase, which would double any quarterly increase going back to the 1940’s. All eyes are on Q4 and the holiday shopping season, which will set the tone for 2021.