Economic Update – Week of September 20, 2020

  • Jobless claims saw a moderate decline, but 12.63 million people remain unemployed.
  • U.S. consumer spending appeared to slow in August as extended unemployment benefits were cut for millions of Americans.
  • Data suggest the economic recovery from the Covid-19 recession is faltering.

Initial Jobless Claims.  According to the Labor Department, jobless claims totaled 860,000 for the week ended Sept. 12.  The number represents a modest decline in claims, which had peaked at 6.9 million in late March.  The labor market has recovered, but millions remain displaced from job closures associated with virus measures.  The economy faces new challenges now after a summer of strong employment growth.  Economists and health-care professionals worry that a resurgence in COVID-19 cases could stall or reverse the gains our economy has seen in recent months.  In other good news a decline in continuing claims, which fell 916,000 to 12.63 million.  The four-week moving average for continuing claims dropped by 532,750 to 13.5 million.  Continuing claims peaked at 24.9 million in early May.  The pace of claims continues to fall, though the millions still unemployed is considerably above anything the U.S. had seen pre-pandemic.

Consumer Spending. U.S. consumer spending slowed in August as extended unemployment benefits were cut for millions of Americans.  The data offers more evidence that the economic recovery from the COVID-19 recession is faltering. Core retail sales correspond most with the consumer spending component of gross domestic product, fell 0.1% last month after a downward revised 0.9% increase in July, according to the Commerce Department.  Overall retail sales increased 0.6%, however, its in part as higher gasoline prices supported receipts at service stations. Manufacturing is also showing signs of fatigue, with output slowing last month.  With at least 29.6 million people still receiving unemployment benefits, the signs of a slowdown in consumer spending are putting the White House and Congress to restart negotiations for another fiscal package.  Consumer spending suffered a record collapse in the second quarter. The pullback in core retail sales in August, if sustained, would set up consumer spending for a slower growth path in the fourth quarter.

The chart below is courtesy of Visual Capitalist and it shows a summary of how the coronavirus is impacting our economic metrics overall.

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