New clues to the economy’s trajectory heading into 2021 will come Thursday morning when the government reports the latest data on initial claims for jobless benefits.
While the Christmas holiday might cause a dip in the numbers, with state unemployment offices that process claims closed for at least one day last week, new filings are expected to stay at a very high level, in the range of more than 800,000 per week, said Greg Daco, chief economist at Oxford Economics. “That’s very elevated and we are facing an economy that has slowed down significantly.”
Applications for benefits declined during Thanksgiving week, only to move higher later, and a similar catch-up phenomenon could happen after Christmas and New Years, too.
In California, widening restrictions on restaurants and other businesses and an uptick in coronavirus infections may cause filings to jump, said Scott Anderson, chief economist at Bank of the West in San Francisco.
“California has locked down even more, and there is no end in sight in terms of cases and hospitalizations,” he said. “We’re seeing more layoffs and that hasn’t shown up in the numbers yet.”
The $900 billion stimulus package that President Trump signed into law Sunday comes too late to affect the jobless claims data. It will take months for the impact of the aid to be felt, and most economists expect the rate of layoffs to remain high.
When fresh monthly jobs data is released by the Labor Department next week, Mr. Anderson expects that it will show a rise in the unemployment rate to 6.9 percent in December, up from 6.7 percent last month. The unemployment rate has fallen sharply since peaking at 14.7 percent in April but hiring has slowed as the economy has faltered in recent months.
What’s more, the pace of layoffs has been persistently high, as sectors like dining, travel and entertainment are struggling while the pandemic has kept many people at home.
The introduction of vaccines is a bright spot, as are positive economic signs, like surging stock prices and a booming housing market. But it will be months before enough Americans can be inoculated to allow people to go to restaurants, events and movie theaters without fear of being infected.
“The trend is not good with the additional closures implemented around the country,” said Carl Tannenbaum, chief economist at Northern Trust in Chicago.