New clues about the economy’s path to 2021 will come on Thursday morning when the government releases the latest data on initial claims for unemployment benefits.
While the Christmas holidays could lead to a drop in numbers, with national unemployment bureaus that process claims closed for at least one day last week, new deposits are expected to remain at a very high level, in the range of over 800,000 a week said Greg Daco, chief economist at Oxford Economics. “It is very high and we are facing an economy which has slowed down considerably.”
Claims for benefits were turned down during Thanksgiving week, only to pick up later, and a similar catch-up phenomenon could also occur after Christmas and New Years.
In California, widening restrictions on restaurants and other businesses and an increase in coronavirus infections could lead to increased deposits, 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 are seeing more layoffs and that has yet to show in the numbers.
The $ 900 billion stimulus package President Trump enacted on Sunday comes too late to affect unemployment claims data. It will take months for the impact of aid to be felt, and most economists expect the layoff rate to remain high.
When new monthly employment data is released by the Labor Department next week, Anderson expects it to show an increase in the unemployment rate to 6.9% in December from 6.7 % last month. The unemployment rate has fallen sharply from its peak of 14.7% in April, but hiring has slowed as the economy has weakened in recent months.
Additionally, the pace of layoffs has been consistently high as industries like food service, travel and entertainment struggle as the pandemic has left many people at home.
The introduction of vaccines is a positive, as are the positive economic signs, such as soaring stock prices and a booming real estate market. But it will be months before enough Americans can be vaccinated to allow people to go to restaurants, events and theaters without fear of being infected.
“The trend is not good with the additional closures being implemented across the country,” said Carl Tannenbaum, chief economist at Northern Trust in Chicago.