By Lucia Mutikani, Reuters
The number of Americans filing new claims for unemployment benefits fell slightly last week, but remained extraordinarily high amid signs that the economic recovery was losing steam as the COVID-19 pandemic intensifies and fiscal stimulus ends.
Initial claims for state unemployment benefits totaled a seasonally adjusted 751,000 for the week ended Oct. 31, compared to 758,000 in the prior week, the Labor Department said on Thursday. Economists polled by Reuters had forecast 732,000 applications in the latest week.
The economy could be plunged into a period of uncertainty following Tuesday’s presidential election, which has raised the specter of a contested result, potentially undermining business investment and delaying a much-needed second coronavirus relief package from the government.
Democrat Joe Biden edged closer to victory on Thursday, while President Donald Trump alleged fraud without providing evidence, filing lawsuits and calling for recounts in a race yet to be decided two days after polls closed.
With a swift fiscal package unlikely as politics take center-stage, the focus will shift to the Federal Reserve to pump more money into the economy. The U.S. central bank is expected to keep interest rates near zero when policymakers conclude a two-day policy meeting later on Thursday.
Though first-time unemployment claims have dropped from a record 6.867 million in March, they remain perched above their 665,000 peak during the 2007-09 Great Recession.
More than $3 trillion in government pandemic relief for businesses and workers fueled a historic 33.1% annualized rate of economic growth in the third quarter. That followed a record 31.4% pace of contraction in the April-June quarter.
Lack of fiscal stimulus and spiraling new coronavirus infections across the country have put the economy on a sharply slower growth path heading into the fourth quarter. Reports on Wednesday showed private payrolls increasing less than expected in October and activity in the services industry cooling.
The government’s closely watched employment report on Friday is expected to show nonfarm payrolls increased by 600,000 jobs in October after rising 661,000 in September, according to a Reuters survey of economists. That would leave employment 10.1 million jobs below its peak in February.
The explosion in COVID-19 cases across the country and cooler weather is likely to weigh on already lackluster demand for services like air travel, hotel accommodation and gym memberships, and eating and drinking at restaurants and bars.
The services industry, which accounts for more than two-thirds of the U.S. economy, has been hardest hit by the pandemic, making it difficult to recoup all the 22.2 million jobs lost during the crisis.