ECB keeps stimulus programs on track US jobless claims decline to a still-high 900,000
Eurozone endures winter economic slowdown due to pandemic Data points to further job cuts in a raging pandemic
WASHINGTON, Jan 21, (AP): Fewer Americans applied for unemployment benefits last week, lowering claims to 900,000, still a historically high level that points to further job cuts in a raging pandemic.
The Labor Department’s report Thursday underscored that President Joe Biden has inherited an economy that faltered this winter as virus cases spiked, cold weather restricted dining and federal rescue aid expired. The government said that 5.1 million Americans are continuing to receive state jobless benefits, down from 5.2 million in the previous week. That signals that fewer people who are out of work are finding jobs.
New viral infections have begun to slow after months of relentless increases, though they remain high and are averaging about 200,000 a day. The number of deaths in the United States from the pandemic that erupted 10 months ago has surpassed 400,000.
Economists say one factor that likely increased jobless claims in the past two weeks is a government financial aid package that was signed into law in late December. Among other things, it provided a $300-a-week federal unemployment benefit on top of regular state jobless aid. The new benefit, which runs through mid-March, may be encouraging more Americans to apply for jobless benefits.
Growth
Once vaccines become more widely distributed, economists expect growth to accelerate in the second half of the year as Americans unleash pent-up demand for travel, dining out and visiting movie theaters and concert halls. Such spending should, in theory, boost hiring and start to regain the nearly 10 million jobs lost to the pandemic.
But for now, the economy is losing ground. Retail sales have fallen for three straight months. Restrictions on restaurants, bars and some stores, along with a reluctance of most Americans to shop, travel and eat out, have led to sharp spending cutbacks. Revenue at restaurants and bars plunged 21% in 2020.
At the same time, a steady weakening of the job market has meant hardship for millions of American households. In December, employers cut 145,000 jobs, the first loss since April and the sixth straight month in which hiring has weakened. The unemployment rate remained stuck at a still-high 6.7%.
Yet there are signs that the $900 billion federal aid package enacted late last month may have begun to cushion the damage, in large part thanks to $600 checks being sent to most adults. The government began distributing the payments at the end of last month.
Those payments have likely helped drive an increase in spending on debit and credit cards issued by Bank of America, economists at the bank wrote last week. Total card spending jumped 9.7% for the week that ended Jan. 9 compared with a year earlier. That was up from a 2% year-over-year increase before the stimulus payments, Bank of America said.
Last week, Biden unveiled a $1.9 trillion coronavirus plan that would provide, among other things, $1,400 checks for most Americans, which, on top of the $600 checks already being distributed, would bring the total to $2,000 per adult.
The new plan would also make available $400 a week in federal benefits for jobless Americans and extend a moratorium on evictions and foreclosures through September. Biden’s $1.9 trillion proposal will require congressional approval.
FRANKFURT, Germany, Jan 21, (AP): With more than a trillion euros in stimulus still in the pipeline to the economy, the European Central Bank left its key bondpurchase program unchanged Thursday as the 19-country eurozone endures a winter economic slowdown due to the pandemic.
Attention will focus on post-decision remarks by bank President Christine Lagarde about the outlook for the recovery in the 19 countries that use the euro currency. The ECB faces potential concerns over political turbulence in heavily indebted Italy, where the government survived a confidence vote this week, and over the stronger euro, which can weigh on exports and growth.
The European economy is going through a rough winter as virus cases and deaths have risen, leading to new restrictions on businesses. Germany on Tuesday extended its partial lockdown until Feb. 14, France has imposed a 6 p.m. curfew, and Portugal hit a new record in case numbers Wednesday. Analysts at Oxford Economics think economic output may fall in the first three months of the year.
The European Union’s executive commission forecasts that the eurozone economy shrank 7.8% last year and should rebound by 4.2% this year. Official numbers for last year are to be released Feb. 2.
Stimulus
The economy is being propped up by massive stimulus from the ECB, national governments, and the European Union. The ECB’s decision not to adjust its key programs was largely expected because it added a major dose of stimulus only last month, at its Dec. 10 meeting. The governing council added 500 billion euros to its pandemic emergency stimulus bond purchases, bringing the total to 1.85 billion euros ($2.2 trillion), and extended the regular purchases through at least March 2022. More than half of that total is still waiting to be deployed.
The bond purchases are a way of pumping newly created money into the economy, which aims to raise inflation from levels that are currently considered too low. The purchases also keep market interest rates down so that companies can access the credit they need to get through the pandemic recession.
One result of the purchases is that governments can use the bond market to borrow cheaply as their deficits rise through spending on pandemic support, such as paying salaries for furloughed workers to avoid layoffs.
Additional stimulus is on the way from the European Union’s 750 billion euro fund established to support the recovery through shared borrowing by member countries - a step toward further solidarity and integration among the 27-member EU. The fund is to support projects that reduce emissions of carbon dioxide, the main greenhouse gas blamed for climate change, and that promote the spread of digital technology and infrastructure.
The ECB is the chief monetary authority for the countries that use the euro, playing a role analogous to that of the Federal Reserve in the U.S. It sets key interest rate benchmarks and supervises banks. So far, 19 of the 27 EU countries have joined the euro.