US Economy Contracted At Record 32.9%; Jobless Claims Rise 1.43 Million (#GotBitcoin?)
The Commerce Department’s initial estimate of U.S. gross domestic product in the second quarter is the steepest drop in records dating to 1947. US Economy Contracted At Record 32.9%; Jobless Claims Rise 1.43 Million (#GotBitcoin?)
The Commerce Department said U.S. gross domestic product—the value of all goods and services produced across the economy—fell at a 32.9% annual rate in the second quarter, or a 9.5% drop compared with the same quarter a year ago. Both figures were the steepest in records dating to 1947.
“The key caveat is that it will be a lot less better than we were expecting a few months ago,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said about the third quarter, citing the pickup in coronavirus cases.
The increased number of people receiving benefits, known as continuing claims, had been declining in recent weeks. Jim O’Sullivan, a strategist at TD Securities, said the reversal “could feed into fears that the economy” is weakening again.
A surge in virus infections since mid-June appears to be slowing the recovery in some states, according to some private-sector real-time data.
The U.S. Census Bureau said in its latest weekly Household Pulse Survey that 51.1% of households experienced a loss of employment income in the week ended July 21, up from 48.3% four weeks ago.
States in May started reopening their economies—leading to partial rebounds in jobs and spending—though a number of them have put fresh restrictions in place because of the infection increase.
“Looking at July’s volumes, there’s some decent signs of hope,” such as increased shipping traffic and some stabilization in energy markets, he said. “Container customers may have over-cut,” he added, saying some are now trying to increase shipping capacity.
Consumer spending, particularly on big-ticket items such as homes, autos and other long-lasting purchases, increased in June. Employers also added nearly 4.8 million jobs in the month, though the labor-market recovery might be slowing as well.
On Wednesday, Boeing Co. said it would cut production of commercial jets and shrink its workforce further. Companies including Harley-Davidson Inc. and Microsoft Corp. -owned LinkedIn also announced job cuts in July.
The number of daily U.S. coronavirus infections has shown recent signs of leveling off amid recent restrictions, but the pandemic continues to cast a cloud over the economy.
The Conference Board, a private research group, said Tuesday that its index of consumer confidence sank to 92.6 in July from 98.3 in June, as consumers became less optimistic about the short-term outlook for the economy and labor market.
“Things that were relatively normal for us—going on vacation, camping, going out to eat with the kids—all that changed since we can’t do that anymore, because they’re closed and we don’t have the money,” she said. “It’s really hard at the moment.”
Businesses also cited continued uncertainty from the pandemic.
“Overall, there’s a lot of chaos. People do not know for sure whether their states are going to shut down tomorrow,” said John Flynn, CEO of Fleet Advantage, a Fort Lauderdale, Fla.-based truck-leasing company. “It’s going to be a tough year for everybody.”
“Everyone is very, very cautious,” said Mike Cavanagh, owner of Key Code Media, an audiovisual company in Burbank, Calif., adding he has business in the pipeline but senses his clients remain nervous about the economy. “I guess the best way to put it is I’m muddling through.”
Congress has approved trillions of dollars in stimulus to help U.S. households and businesses get through the pandemic, and another package is now being negotiated on Capitol Hill. One key component—an extra $600 in weekly jobless benefits—is due to expire at the end of July, but lawmakers are still discussing whether and how to extend the aid.
U.S. Added 916,000 Jobs In March As Hiring Accelerated
Unemployment rate fell to 6%; jobs growth appears set to take off.
U.S. hiring surged in March as the economic recovery accelerated, the start of what economists say could be a sustained run of job growth to industries, regions and workers hardest hit during the pandemic.
U.S. employers added a seasonally adjusted 916,000 jobs in March, the best gain since August, the Labor Department said Friday, and the unemployment rate, determined by a separate survey, fell to 6.0%, a pandemic low. Still, as of March, there are 8.4 million fewer jobs than in February 2020 before the pandemic hit.
The jobs rebound is gaining renewed momentum as more people are vaccinated against Covid-19, states lift restrictions on business activity, and consumers grow more comfortable dining, shopping and traveling outside their homes.
“There’s a seismic shift going on in the U.S. economy,” said Beth Ann Bovino, a Ph.D. economist at S&P Global. The confluence of additional federal stimulus, growing consumer confidence and the feeling that the pandemic is close to abating—despite rising infections in recent weeks—is propelling economic growth and hiring, she said.
Other recent data shows restaurant, hotel and airlines bookings are up and consumers are spending more at gyms, salons and spas in recent weeks than they have in more than a year. Consumer spending accounts for more than two-thirds of economic demand and is an important element of the recovery.
“Fear is subsiding, and American households are sitting on a lot of cash” from stimulus checks and savings from reduced spending on vacations, commuting and child care, said Dr. Bovino. “That’s going to support spending, especially in the services sector.”
Yields on U.S. government bond yields rose after the jobs report was released in an abbreviated day of trading. U.S. stock markets were closed in observance of Good Friday.
Friday’s report showed hiring rose in most industries, led by a gain of 280,000 in the category that includes restaurants and hotels. Employment also rose sharply in construction, most manufacturing sectors and public and private schools. Temporary help and auto manufacturing, where a semiconductor shortage has idled assembly plants, were weak spots.
Nearly two million fewer Americans reported last month they were unable to work because their employer closed or lost business due to the pandemic and 500,000 less said they couldn’t seek work due to the pandemic. The share of employees who worked remotely due to the coronavirus also declined last month, the Labor Department said.
The gains could provide more employment opportunities to women and racial minorities, who disproportionately lost jobs last year. And job growth could pick up in hard-hit cities in the Northeast and California, and in tourist hotbeds such as Las Vegas and Orlando, Fla. Regional employment data for March will be available April 16.
Some economists project job growth will top one million in April. Further out, economists surveyed by The Wall Street Journal project employers will add an average of 514,000 jobs each month over the next year, for a total of more than six million. That would mark the best 12-month stretch of job creation in decades but leave overall employment totals below where they stood before the pandemic.
Even with sustained hiring, industries, workers and regions suffering the most from the pandemic still face lengthy recoveries. Those mostly dodging the downturn—better paid, more highly educated workers and states that imposed lighter restrictions—are expected to return quickly to the strong economy that existed before the pandemic.
Stronger growth should return jobs to industries with the deepest losses during the pandemic. Last month, restaurants and bars added 176,000 jobs, arts, entertainment and recreation venues added 64,000 jobs, and accommodations added 40,000 jobs. Still, employment in the overall leisure and hospitality sector is down by 3.1 million, or 18.5% from February 2020.
The Tampa, Fla.-based Beef ‘O’ Brady’s and Brass Tap restaurant chains are hiring about 400 additional employees, mostly prep cooks and dishwashers, as demand increases, said Chris Elliott, chief executive of parent FSC Franchise Co.
The company had its best sales week on record in mid-March, which coincided with St. Patrick’s Day, the college basketball tournaments and spring break, he said.
“Pent-up demand as Covid goes away is really strong,” Mr. Elliott said.
He added that the chains are having trouble filling open positions, which pay between $12 and $15 an hour, because of increased competition for workers. He said some potential employees aren’t actively looking for work, with enhanced unemployment benefits available until September. The company is increasing recruiting efforts and speeding up the hiring process.
“If someone comes in with an application, you talk to them that day,” Mr. Elliott said. “If you tell them to come back tomorrow, they’ll already have a job.”
The economic expansion will also support additional job growth at sectors that fared relatively well during the pandemic. Construction added 110,000 jobs in March. Warehousing and transportation, driven by online shopping, added 48,000 jobs. Job gains in manufacturing sectors such as metal fabrication, machinery and food processing offset the decrease in auto making.
Storch Products Co., a decades-old manufacturer in Livonia, Mich., reduced staff by five workers last year, said Matt Carr, the company’s president. Since then, demand has picked up for the industrial magnets and related machines it produces.
The company recently hired three new employees and has several open positions in both sales and production.
“We were seeing a lot of growth before Covid, and now I feel we’re getting back to that,” Mr. Carr said. “It feels like we’re a startup,” he added.
Hourly shifts have increased in the Midwest, recently surpassing the Southeast, according to the workplace software firm Ultimate Kronos Group. While hourly work in all regions remains below pre-pandemic levels, higher shift totals can be a precursor to better job growth.
Areas of the country that depend largely on tourism, including Nevada and Hawaii, should see strong hiring as many Americans start to travel domestically again, said Gabe Ehrlich, a Ph.D. economist at the University of Michigan.
Partial reopenings of offices will aid employment in New York, California and other states, helping cities with some of the highest unemployment rates in the U.S.
“Those areas are coming out of a much deeper hole than the rest of the country,” Dr. Ehrlich said.
The return of in-person-services jobs should aid in the hiring of women, who disproportionately held those jobs lost during the pandemic. The unemployment rate for women in March fell to 5.9% versus the 6.2% rate for men. However, a larger share of women dropped out of the labor force during the pandemic and many haven’t returned.
Those with lower levels of education are also seeing gains. The unemployment rate for those with less than a high school diploma fell to 8.2% last month from 10.1% in February. The rate also declined for those with only a high school education, but held nearly steady for college grads. And the return of some lower-skilled workers likely helped push down average hourly wages by 4 cents to $29.96.
Increased service-sector hiring could also help Latino and Black workers, who are furthest from fully recovering job losses after advances late in the last expansion. The unemployment rate for Latino workers fell below 8% last month. And while the rate for Black workers also decreased, it remains well elevated at 9.6%
“It’s an open question how much trouble those groups will have as we come out of the pandemic and hiring improves,” Dr. Ehrlich said. “When you lose your job, it can be a slippery ladder to get back on.”
U.S. Jobless Claims Extend Decline To New Pandemic Low
Claims, a proxy for layoffs, edged lower to 406,000 in the week ended May 22.
Worker filings for jobless benefits fell again to a fresh pandemic low, extending a steady downward trend and adding to signs of a healing labor market and a broader, though uneven, economic recovery.
Initial unemployment claims for regular state programs, a proxy for layoffs, fell last week to 406,000 from 444,000 the prior week, the Labor Department said Thursday. That level represents the lowest levels of claims since the coronavirus pandemic’s onset last year and the fourth consecutive week claims have reached a new pandemic low. Economists surveyed by The Wall Street Journal had forecast there were 425,000 new claims last week.
A separate report from the Commerce Department showed orders for cars, appliances and other long-lasting, or “durable,” goods fell a seasonally adjusted 1.3% in April from March—the first monthly decline in demand for such products in a year.
The decline was concentrated in the automotive sector, where a semiconductor shortage has caused disruptions, and the defense industry, which tends to be very volatile. Shipments of motor vehicles and parts fell sharply as well, while shipments of defense capital goods rose.
Low business and retail inventories have translated to increased demand for manufacturers for much of the past year, but supply-chain issues continue to constrain production and delay some shipments.
Excluding transportation, durables orders were up 1% in April and excluding defense, they were unchanged from March.
Orders for nondefense capital goods excluding aircraft—also known as core capital goods, a proxy for business investment—increased 2.3% in April.
“In short, notwithstanding the headline figure, this report points to ongoing explosive expansion,” Stephen Stanley, chief economist at Amherst Pierpont Securities, said of the durable goods figures in a note to clients.
U.S. gross domestic product, a broad measure of the economy’s output of goods and services, rose in the first quarter at an annual rate of 6.4%, unrevised from the initial estimate, according to another Commerce Department report. Consumer spending, the economy’s key driver, was revised up to an annual rate of 11.3% in the first three months of the year.
Taken together, Thursday’s data point to a labor market that is gaining strength as Covid-19 cases steadily decrease, more Americans receive vaccines against the virus and governments ease restrictions on businesses, although the broader economic recovery remains uneven.
“I think there’s still a lot of pain out there, but the good news is that it really looks like the economy is kicking into overdrive, and I do see positive signs for the job market,” said Beth Ann Bovino, chief U.S. economist at S&P Global Ratings.
U.S. employment overall is down by more than eight million jobs compared with pre-pandemic levels.
Meanwhile, initial jobless claims remain higher than before the pandemic. The number of Americans continuing to receive unemployment benefits through regular state programs fell to 3.6 million in the week ended May 15, after rising the previous week.
As of early May, nearly 16 million Americans were continuing to claim benefits through all unemployment programs, including special programs designed to support workers through the pandemic. Some businesses and Republican lawmakers have recently expressed concern that a federal pandemic program that provides benefit recipients with a $300 weekly supplement may be constraining employers’ ability to hire workers.
Roughly two dozen states, all led by Republicans, have announced they will end the supplement this summer, ahead of its scheduled expiration in early September.
Research from the jobs site Indeed.com measured those states’ share of national job search activity, as reflected in clicks on job postings, after they announced the plans to end the supplement early. The research found job search activity in those states increased immediately after the announcements. However, the rise was fleeting, the research found, and within eight days returned to prior levels.
Surveys suggest the benefits are among several reasons many workers remain out of the job market, despite continued high unemployment. Other reasons include fears of contracting Covid-19, schools remaining closed or only partially reopened, and lack of skills needed for the available positions. The Labor Department reported employers added just 266,000 jobs last month, compared with the one million economists had expected.
Tim Bridges, owner of The Cleaning Authority in Troy, Mich., said demand for his company’s services has been picking up recently, but that he hasn’t been able to take on new customers quickly because of limited staff.
He said some workers who have turned down his job offers cited enhanced unemployment benefits. Mr. Bridges last year raised the company’s starting wage to $15 an hour, and he said he recently changed company policies to offer staff more flexible schedules in an attempt to attract additional workers. He said he has hired five new workers over roughly the past two months, bringing his total number of staff to 28, but is still looking for more.
“It’s a more competitive marketplace to find employees. We’re doing everything we can,” he said.
Mr. Stanley, of Amherst Pierpont Securities, said he expects the Labor Department to report next week that employers added 700,000 jobs in May. He said constraints on the supply of labor should ease as enhanced unemployment benefits end, more people become vaccinated and schools reopen, potentially reducing some Americans’ lingering health and child-care concerns.
“I think more and more people will get out there and search for jobs and that should help both alleviate stress in the job market and accelerate the pace of reported job gains,” he said.
Supply-chain disruptions are likely also limiting companies’ ability to hire, said Robert Frick, corporate economist at Navy Federal Credit Union. He said employers must also adjust to a hiring landscape that is fundamentally altered because many workers’ preferences and habits have changed over the course of the pandemic.
“When something crashes in the economy, it’s going to be built back differently. Right now, we’re in the process of figuring out what’s the same and what’s different,” Mr. Frick said. “People are figuring out, ‘Is my job gone for good?’ and may also be thinking, ‘Do I want to go back to my job?’ ”
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