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WRAPUP 1-U.S. weekly jobless claims fall; consumer spending solid in August

Thu, 1st Oct 2020 13:33

WASHINGTON, Oct 1 (Reuters) - The number of Americans filing
new claims for jobless benefits drifted lower last week, though
remaining at recession levels, underscoring the need for another
government rescue package for businesses and the unemployed.

Initial claims for state unemployment benefits totaled a
seasonally adjusted 837,000 for the week ended Sept. 26,
compared to 873,000 in the prior week, the Labor Department said
on Thursday. Economists polled by Reuters had forecast 850,000
applications in the latest week.

Claims have stalled at higher levels after dropping below 1
million in August as the government changed the way it strips
seasonal fluctuations from the data. They are above their
665,000 peak during the 2007-09 Great Recession, though filings
have dropped from a record 6.867 million at the end of March.

Labor market gains from the reopening of businesses are
fading and economists are predicting a slowdown in hiring
through the rest of 2020 and into 2021, without another fiscal
package. House of Representative Speaker Nancy Pelosi, a
Democrat, and Treasury Secretary Steven Mnuchin met on Wednesday
in a bid to broker a bipartisan deal on stalled negotiations.

New coronavirus cases are rising, with a surge expected in
the fall, which could lead to some restrictions being imposed on
businesses in the services sector. In addition, political
uncertainty is rising and could extend beyond the Nov. 3
presidential election, and make businesses reluctant to hire.

Several months after operations resumed, demand has remained
poor, especially in the services sector, leading some
establishments to permanently shut down and keeping job cuts
elevated. Walt Disney Co. said on Tuesday it would lay
off roughly 28,000 employees in its theme parks division.

The government is scheduled to publish its closely followed
employment report on Friday. According to a Reuters survey of
economists nonfarm payrolls likely increased by 850,000 jobs in
September after rising 1.371 million in August. That would leave
employment 10.7 million below its level in February.

Employment growth peaked in June when payrolls jumped by a
record 4.781 million jobs.

A separate report on Thursday from the Commerce Department
showed consumer spending rose 1.0% in August after increasing
1.5% in July. Economists had forecast consumer spending, which
accounts for more than two-thirds of U.S. economic activity,
advancing 0.8% in August.

The economy is on track for record growth in the third
quarter after a historic slump in the April-June period.
Consumer spending has in part been anchored by a $600
unemployment subsidy, which ended in July and was replaced by a
$300 supplement.

But funding for the program is running out, shifting the
economy into low-growth gear heading into the fourth quarter.

Third-quarter GDP growth estimates are topping a 32%
annualized rate. The economy contracted at a 31.4% pace in the
second quarter, the deepest decline since the government started
keeping records in 1947. Growth estimates for the fourth quarter
have been cut to around a 2.5% rate from above a 10% pace.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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