WASHINGTON – The worsening of the viral pandemic across the United States and Europe is threatening their economies and intensifying pressure on governments and central banks on both continents to intervene aggressively.
In a worrisome sign of the harm the virus is inflicting in the U.S, the government said Thursday that the number of Americans seeking unemployment benefits jumped last week to 853,000 — the most since September. The surge in jobless claims made clear that many companies are still shedding workers as states reimpose business shutdowns and consumers avoid shopping, traveling or dining out.
Consumers thus far haven’t spent as much this holiday shopping season as they have in previous years, according to credit and debit card data, and last month U.S. employers added jobs at the slowest pace since April. Restaurants, bars and retailers all cut jobs in November.
Responding to similar pressures, the European Central Bank announced Thursday that it will ramp up its bond-buying program to try to hold down longer-term interest rates to spur borrowing and spending. The ECB's action coincided with the highest single-day viral death toll in Germany, Europe's largest economy, and the shutdown of restaurants, bars, gyms, movie theaters and museums in France.
The coronavirus “is having an impact on consumers, it is having a big impact on the labor force, it is having an impact on businesses,” said Gus Faucher, an economist at PNC Financial. “There are reasons to be concerned.”
When the U.S. Federal Reserve meets next week, it may provide more detailed guidance on how long it will continue its own bond-buying program, which could reassure markets that its purchases won't end anytime soon. The Fed could announce other moves, such as shifting more of its purchases to longer-term bonds to try to further cut long-term borrowing rates and encourage spending. But most analysts think the Fed will keep that step in reserve.
Last week, the number of Americans who applied for jobless benefits jumped from 716,000 in the previous week. Before the coronavirus paralyzed the economy in March, weekly jobless claims typically numbered only about 225,000.
The surge in laid-off people seeking aid could raise pressure on Congress and the Trump administration to agree on another financial aid package to bolster the economy through what is sure to be a financially painful winter for millions.
A bipartisan group of senators has proposed a $908 billion package that would extend two unemployment benefit programs that are set to expire Dec. 26 for an additional four months. Without such an extension, more than 9 million unemployed workers would lose benefits, making it even harder for them to pay bills, buy food and keep up with rent or mortgage payments.
One disturbing sign in Thursday's report on jobless claims was that the total number of people who are receiving state-provided unemployment aid rose for the first time in three months — from 5.5 million to 5.8 million. The increase indicated that some companies have pulled back on hiring.
AnnElizabeth Konkel, an economist at the job listing website Indeed, said that increase was particularly concerning because it suggested that the December jobs report, to be released in early January, could show that the U.S. economy suffered a net loss of jobs in a month for the first time since April.
“Today's report is the first overt signal of a backward slide,” Konkel said. “It’s evident the labor market is still in crisis.”
One of the jobless, Montrell McGraw, said he just had to cancel his car insurance and now can’t drive because his unemployment benefit of just $222 a week isn’t enough to keep up with the payments. He is also behind on his rent.
He managed to cover all his bills when the federal government was providing $600 a week in jobless aid. But that program ended in July. And his current unemployment aid will expire in just over two weeks if it isn't extended.
McGraw, 26, lost his job as a cook at a Hilton Hotel in New Orleans, where he lives, back in March just after the virus erupted in the United States. He said he’s applied for 35 jobs without any luck. His primary work experience is in restaurants, few of which are hiring. It will be even harder to search for work without a car.
Most of the available jobs he sees involve trucking or work on offshore oil rigs, which require certifications he can’t afford to obtain. McGraw has also worked with an advocacy group, Step Up Louisiana, in support of extending jobless benefits.
“I didn’t ask for this — no one asked for this pandemic,” he said. “I am trying to play the cards I am dealt with, and I have a really bad hand.”
He said he hopes that Congress will agree soon to extend jobless aid.
“Maybe then I can get my car insurance back,” he said.
Across the U.S. economy are widespread signs of sluggish growth. According to data from Opportunity Insights, a research center affiliated with Harvard and Brown universities, spending on debit and credit cards — a critical barometer of growth — sank nearly 12% in the week that ended Nov. 29 compared with a year earlier. That marked a sharp drop from the previous week, when such spending was down just 2.3% from 12 months earlier.
And last week's jump in jobless claims ranged broadly. New applications surged more than 47,000 in California, 31,000 in Illinois, 17,000 in New York and 13,000 in Georgia. Many states, particularly California, have adopted sweeping new restrictions on business activity. But even some states that generally haven't imposed stricter rules on businesses reported sharp increases in jobless claims last week. In Texas, for example, they jumped by nearly 20,000 to 45,000.
The worsening figures may partly reflect a rebound after applications for unemployment benefits had fallen during the Thanksgiving holiday week. Still, the increase was much larger than most economists had expected.
All told, more than 19 million people are still dependent on some type of unemployment benefit. And unless Congress acts soon, nearly half of them will lose that aid in just over two weeks. That's when two jobless aid programs that the federal government created in the spring are set to expire.
The first program provides unemployment benefits to the self-employed and contract workers, who weren’t eligible in the past. The second program is the one that extends jobless aid for 13 weeks.
With a coronavirus vaccine nearing approval, many economists are optimistic that the economy will rebound strongly next year. But most warn that another federal financial relief package is urgently needed to support unemployed workers, small businesses and state and local governments until then.
This story was first published on Dec. 10, 2020. It was updated on Dec. 11, 2020, to correct the name of the advocacy group that Montrell McGraw has worked with. It is “Step Up Louisiana,” not “Stand Up Louisiana.”