US jobless claims plummeted last week to a three-month low. Retail sales data, declines in COVID-19 cases and vaccinations also add optimism. However, winter storms in the southeastern United States, including Texas, will bring short-term performance deterioration.
On Thursday, the US Labor Department reported significantly better-than-expected weekly jobless claims for the week.
Other prior government data also show positive trends.
US Unemployment Claims
The number of initially filed jobless claims showed the largest weekly decline since late August.
In the week ending February 20, filings fell 111,000 to 730,000 as the number of Covid-19 infections declined, many service businesses resume operations and the pace of vaccinations accelerates. This is significantly better than the economists’ forecasts of 838 thousand.
At the same time, the indicator is still far from the “pre-pandemic” level, when the labor market indicators were record high. The US Department of Labor chart below shows the trend in the number of jobless claims since January 2020.
The number of continuing claims for unemployment benefits also fell to 4.42 million, the lowest since March 21, but also well above the “pre-pandemic” rate.
Chris Lowe, chief economist at FHN Financial, noted that these improvements also reflect the impact of the nearly $ 900 billion pandemic bailout bill provided by the government at the end of December.
The US unemployment rate fell to 6.3% in January 2021, down 0.4% from the previous month and well below market expectations of 6.7%. At the same time, before the pandemic, the unemployment rate was 3.5%.
Fed Chairman Jerome Powell, speaking before Congress this week, said the central bank will give more weight to the employment rate than to the unemployment rate.
The US economy has recovered 12.3 million of the 22.2 million jobs lost during the pandemic. Employment is not expected to return to pre-pandemic levels until 2024.
US labor market data may not reflect reality
At the same time, analysts warn that the situation may change in the short term, as the full recovery of the labor market is hampered by the continuing quarantine restrictions associated with the coronavirus and the lack of new financial assistance from the US government.
In addition, the number of applications may rise due to the effects of stormy weather in the southeastern United States, including most of Texas, where millions of people were left without electricity due to the disaster. The number of applications for benefits from Texas residents likely fell last week as power outages interfered with their supply and processing.
“We would not be surprised to see a rise in filings next week due to weather-related conditions, but expect the downward trend to become more pronounced during March,” said Sarah House, senior economist at Wells Fargo.
Aggregate factors of the US economy
Other government data also speaks of gradual improvements in the US economy:
In the fourth quarter, GDP grew 4.1%, although this is far from the strong 33.4% growth in the third quarter.
The GDP forecast for the first quarter rose from 2.3% to 6% (compared to last year’s value).
US retail sales rose the most in January in the past seven months.
The most important issue on the agenda remains the consideration by Congress of the bill to help the economy in the context of the $ 1.9 trillion pandemic, put forward by Joe Biden and supported by Democrats. For the approval and adoption of these stimuli for the economy, the bill must be approved by the House of Representatives and the Senate.
The House of Representatives, with a Democratic majority, is expected to pass the bill on Friday.