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Economic Roundup: Consumer Spending & Jobless Claims

Even with a few steps forward, Covid-19 is pushing recovery a few steps back.
(PopTika)
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“The U.S. economy is heading into the holidays continuing to recover, in large part because Americans continue to boost their spending, particularly on goods,” WSJ writes.

Up And Down: Commerce Department Data arriving Wednesday is expected to show consumer spending increased in October for the sixth straight month and household income declined as the effects of government aid programs dried up.

  • Though it’s still going up, consumer spending has notably slowed since a robust summer. But with consumer spending responsible for two-thirds of economic activity in the U.S., the rising numbers have been a boon to climbing out of the latest recession.

“Jobless claims rose for the second straight week, to 778,000, a sign the surge in virus cases was starting to weigh on the labor-market recovery,” WSJ writes.

Claims can be more “volatile around the holidays, due to workweek changes that can cause seasonal-adjustment anomalies.”

Other Key Points:

  • Job growth was “robust in October, though it has slowed every month since June.” Unemployment levels decreased to 6.9%, but it’s still nearly double February’s 3.5% rate.
  • Retail sales ticked up in October, but at the slowest rate since spring.
  • Economic output increased at record levels in Q3 but still hasn’t returned to pre-pandemic numbers.
  • Aggregate household income decreased last month but remained above its level from just before the pandemic hit in March, economists project.

The Bottom Line: While the U.S. has taken vital steps toward recovery, a resurgent wave of Covid-19 infections and new restrictions to combat the spread has left the economic outlook dim.

Justin Oh:

We are continuing along the diminishing return curve of a recovery without a vaccine. We will need a widely-distributed vaccine and the opening up of economies to see further labor market improvement from here. 

A bright spot in the economy is that consumers seem to feel confident enough with their savings to continue to spend strongly. I am slightly net bullish on what 2021 has to bring, although we should temper our expectations for returns.

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