WASHINGTON (AP) — The worsening of the viral pandemic across the United States (US) and Europe is threatening their economies and intensifying pressure on governments and central banks on both continents to intervene aggressively.
In a worrisome sign of the harm the virus is inflicting in the US the government said on Thursday that the number of Americans seeking unemployment benefits jumped last week to 853,000 — the most since September. The surge in jobless claims made clear that many companies are still shedding workers as states reimpose business shutdowns and consumers avoid shopping, travelling or dining out.
Consumers thus far haven’t spent as much this holiday shopping season as they have in previous years, according to credit and debit card data, and last month US employers added jobs at the slowest pace since April. Restaurants, and retailers all cut jobs in November.
Responding to similar pressures, the European Central Bank (ECB) announced on Thursday that it will ramp up its bond-buying programme to try to hold down longer-term interest rates to spur borrowing and spending. The ECB’s action coincided with the highest single-day viral death toll in Germany, Europe’s largest economy, and the shutdown of restaurants, gyms, movie theatres and museums in France.
The coronavirus “is having an impact on consumers, it is having a big impact on the labour force, it is having an impact on businesses”, said Economist at PNC Financial Gus Faucher. “There are reasons to be concerned.”
When the US Federal Reserve meets next week, it may provide more detailed guidance on how long it will continue its own bond-buying programme, which could reassure markets that its purchases won’t end anytime soon. The Fed could announce other moves, such as shifting more of its purchases to longer-term bonds to try to further cut long-term borrowing rates and encourage spending. But most analysts think the Fed will keep that step in reserve.
Last week, the number of Americans who applied for jobless benefits jumped from 716,000 in the previous week. Before the coronavirus paralysed the economy in March, weekly jobless claims typically numbered only about 225,000.
The surge in laid-off people seeking aid could raise pressure on Congress and the Trump administration to agree on another financial aid package to bolster the economy through what is sure to be a financially painful winter for millions.
A bipartisan group of senators has proposed a USD908 billion package that would extend two unemployment benefit programmes that are set to expire December 26 for an additional four months. Without such an extension, more than nine million unemployed workers would lose benefits, making it even harder for them to pay bills, buy food and keep up with rent or mortgage payments.
One disturbing sign in Thursday’s report on jobless claims was that the total number of people who are receiving state-provided unemployment aid rose for the first time in three months — from 5.5 million to 5.8 million. The increase indicated that some companies have pulled back on hiring.
Economist at the job listing website Indeed AnnElizabeth Konkel, said that increase was particularly concerning because it suggested that the December jobs report, to be released in early January, could show that the US economy suffered a net loss of jobs in a month for the first time since April.
“Today’s report is the first overt signal of a backward slide,” Konkel said. “It’s evident the labour market is still in crisis.”
Across the US economy are widespread signs of sluggish growth. According to data from Opportunity Insights, a research centre affiliated with Harvard and Brown universities, spending on debit and credit cards — a critical barometre of growth — sank nearly 12 per cent in the week that ended November 29 compared with a year earlier. That marked a sharp drop from the previous week, when such spending was down just 2.3 per cent from 12 months earlier.
And last week’s jump in jobless claims ranged broadly. New applications surged more than 47,000 in California, 31,000 in Illinois, 17,000 in New York and 13,000 in Georgia. Many states, particularly California, have adopted sweeping new restrictions on business activity. But even some states that generally haven’t imposed stricter rules on businesses reported sharp increases in jobless claims last week. In Texas, for example, they jumped by nearly 20,000 to 45,000.
The worsening figures may partly reflect a rebound after applications for unemployment benefits had fallen during the Thanksgiving holiday week. Still, the increase was much larger than most economists had expected.
All told, more than 19 million people are still dependent on some type of unemployment benefit. And unless Congress acts soon, nearly half of them will lose that aid in just over two weeks. That’s when two jobless aid programmes that the federal government created in the spring are set to expire.
The first programme provides unemployment benefits to the self-employed and contract workers, who weren’t eligible in the past. The second programme is the one that extends jobless aid for 13 weeks.