The second wave of layoffs could grow bigger
WASHINGTON, May 29 (NNN-AGENCIES) — The number of Americans filing for unemployment benefits held above 2 million last week for a 10th straight week amid job cuts by US state and local governments whose budgets have been decimated fighting the COVID-19 pandemic and more second-wave layoffs in the private sector.
Signs the economy was spiraling deeper into recession were underscored by other data on Thursday showing business spending on equipment plummeting in April.
The economy contracted in the first quarter at its steepest pace since the 2007-09 recession. Data on the housing market, manufacturing and consumer spending point to a collapse in gross domestic product in the second quarter at a pace last seen during the Great Depression.
Initial claims for state unemployment benefits totaled a seasonally adjusted 2.123 million for the week ended May 23, from a revised 2.446 million in the prior week, the Labor Department said.
Though claims have declined steadily since hitting a record 6.867 million in late March, they have not registered below 2 million since mid-March.
The astonishingly high level of claims has persisted even as non-essential businesses are starting to reopen after shuttering in mid-March to control the spread of COVID-19, an indication it could take a while for the economy to dig out of the coronavirus-induced slump.
U.S. stocks were trading higher, but simmering tensions between the United States and China kept investors on edge. The dollar eased against a basket of currencies. U.S. Treasury prices dipped.
The second wave of layoffs could grow bigger, with Boeing announcing on Wednesday it was eliminating more than 12,000 US jobs and also disclosing it planned “several thousand remaining layoffs” in the next few months.
Last week’s applications raised the number of people who filed claims for unemployment benefits to above 40 million since March 21. Economists cautioned this figure does not represent the number of job losses as not all applications are approved and some people could be submitting more than one application, while others could have since found employment.
They said the focus should be on the number of people still receiving unemployment benefits to get a clear picture of the labor market’s health. These so-called continuing claims are reported with a one-week lag and are being watched to assess how quickly the economy will rebound as businesses reopen and the effectiveness of the government’s Paycheck Protection Program.
The PPP is part of a historic fiscal package worth nearly $3 trillion and offered businesses loans that could be partially forgiven if they were used for employee salaries.
In a separate report on Thursday, the Commerce Department said orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 5.8% last month after falling 1.1% in March.
Shipments of these so-called core capital goods dropped 5.4% last month. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement. Last month’s declines suggested business investment decreased further early in the second quarter after four straight quarterly decreases.
The Commerce Department also said on Thursday GDP contracted at a 5.0% annualized rate in the first quarter, the deepest drop in output since the 2007-09 Great Recession, rather than the 4.8% pace estimated last month.
Recessions in the United States are called by the National Bureau of Economic Research, which does not define a recession as two consecutive quarters of decline in real gross domestic product, as is the rule of thumb in many countries. Instead, the NBER looks for a drop in economic activity, spread across the economy and lasting more than a few months.
Economists believe the economy slipped into recession in March. They are expecting GDP will drop in the second quarter at as much as a 40% rate. — NNN-AGENCIES
