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US initial jobless claims rise for the second week in a row

First-time applications for unemployment benefits rose to 778,000 last week, the latest worrying sign of waning momentum in the US labour market as it grapples with a new wave of coronavirus cases and fading fiscal support.

The increase of 30,000 in weekly jobless claims came alongside a slight decrease in claims for federal pandemic unemployment assistance, a separate programme for workers not eligible for regular state benefits, the labour department said on Wednesday.

Overall, nearly 1.1m Americans sought jobless claims for the first time last week, and about 20.5m are receiving unemployment benefits of some kind, more than eight months since the coronavirus crisis began in the US.

“Encouraging vaccine news bodes well for economic activity from mid-2021 onward, but the expiry of policy safety nets at the end of 2020 means the near-term outlook will be bleak for many heading into the holiday season,” Nancy Vanden Houten, an economist at Oxford Economics, wrote in a note.

The discouraging data on unemployment claims come as negotiations are at a standstill on possible new stimulus for the US economy, with no signs of serious negotiations between the outgoing Trump administration, Republicans who hold the majority in the US Senate and Democrats who control the House of Representatives.

Joe Biden, the US president-elect, has called for quick action to reach a deal even before he takes office in January, but so far his appeals have yielded little movement.

The labour market report came amid a flurry of economic data released on Wednesday morning, which presented a mixed picture of how the US economy has fared since the initial pandemic shock earlier this year.

The US Census Bureau confirmed that the economy rebounded at an annualised pace of 33.1 per cent in the third quarter — 7.4 per cent compared with the previous quarter — as it bounced back from a massive slump at the start of the pandemic.

But economists are concerned that the pace of growth in the US slowed dramatically in the fourth quarter and output will struggle to get back to pre-pandemic levels.

The US trade deficit — which US president Donald Trump had vowed to slash during his four years in office — widened to $80.3bn in October, from $79.4bn in September, roughly in line with expectations.

Orders for long-lasting goods rose 1.3 per cent in October — higher than the 0.9 per cent increase that had been expected. Orders have increased for six consecutive months, with the manufacturing sector continuing to recover from the coronavirus lockdowns, albeit at a slower pace.

Meanwhile, new orders for non-defence capital goods excluding aircraft, considered a proxy for business investment, rose 0.7 per cent, ahead of expectations, following a 1.9 per cent rise the previous month. However, despite vaccine breakthroughs, the resurgence in coronavirus cases has clouded the outlook for manufacturing and business investment. 


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