The number of Americans filing new jobless claims has remained below pre-pandemic levels last week as the job market strengthens, while consumer spending has picked up, sending the economy into a slump. solid end of the year.
The strength of the economy shown by the data released on Thursday (23), which also showed new home sales at a high in seven months and manufacturing activity still accelerated during November, comes at a time when the country is fighting the resurgence of Covid-19 infections, driven by the delta strain and the highly transmissible omicron variant. This could affect economic activity in the first quarter.
“The economy was in full swing in the fourth quarter,” said Diane Swonk, chief economist at Grant Thornton in Chicago. “The bad news is that much of the weakness associated with the spread of the omicron is still ahead of us. Some of it may show up in the December data, but the bulk will show up in the form of canceled events and trips and less spending on services in January.”
Among labor market data, initial jobless claims were unchanged at 205,000 (seasonally adjusted) for the week ended Dec. 18 (in line with expectations), the Labor Department said. Earlier this month, claims dropped to 188,000, the lowest level since 1969.
Orders fell between the November and December survey periods, suggesting an acceleration in job growth this month. The shortage of labor, however, remains a challenge. There are positive signs that unemployed Americans are starting to return to the work force, but the rise in coronavirus infections could be an obstacle.
The strength of the labor market is underscored by an unemployment rate that has hit a 21-month low of 4.2%. A record 11 million vacancies were waiting to be filled at the end of October.
A separate Commerce Department report on Thursday showed that consumer spending, which accounts for more than two-thirds of US economic activity, rose 0.6% last month, after rising 1.4% in October. Services had an increase of 0.9%, which represents almost the entire increase in spending. The broad increase in services was led by housing and utilities.
“Although consumers say they are worried about inflation, the outlook for household spending growth in 2022 is solid,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. “Consumers have an extra $2 trillion in savings over the period before the pandemic, thanks to government assistance in 2020 and 2021 and limited spending opportunities.”
The shortage of goods has hampered company spending on equipment. A third Commerce Department report showed that orders for non-defence-related capital goods, excluding aircraft — a measure of companies’ spending plans —​ fell 0.1% last month.
Economic growth forecasts for the fourth quarter are up to 7.5% (at an annualized rate). The economy expanded 2.3% in the third quarter. GDP is expected to increase by 5.6% this year, according to a Reuters survey of economists, which would be the fastest pace since 1984. The economy contracted by 3.4% in 2020.
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