There’s been a lot of concern over exactly how the economy is doing and why things haven’t gotten better faster. While most people were expecting some sort of recovery, especially considering the billions of dollars in stimulus already pumped into the economy, some aspects of the economy have struggled to improve.
Unemployment is one of them. On a week-by-week basis, the figures have constantly moved up and down, aggravating many economists. However, the Labor Department released new figures that showed a dramatic improvement from the previous week. At the same time, new data showing an increase in retail spending is also encouraging economists that things are getting better.
Unemployment claims, a proxy for the number of newly unemployed Americans, fell substantially. Despite a lot of ups and downs over the past weeks, the country finally saw a major improvement. Last week’s unemployment claims fell to just 576,000, over 200,000 less than the 769,000 the Labor Department reported just one week earlier. That happens to be the lowest point seen since the pandemic first started.
“With a huge, better-than-expected decline in new claims for unemployment assistance, at long last the economic recovery appears to be picking up speed,” said Mark Hamrick, senior economic analyst at Bankrate. “Not only did the headline number of seasonally adjusted initial claims drop beneath the 700,000 level, but it continued on below 600,000 to the lowest since mid-March of 2020.”
There are a few reasons why this is the case. For one, the increase in vaccination rates across the country is definitely playing a role. The more people get vaccinated for COVID-19, the more comfortable governments are with opening up businesses again. On that note, a number of states are easing up on business restrictions, including dining and other semi-social activities.
Most obviously, the $1.9 trillion stimulus package passed earlier into law also likely had an effect. However, it’s already been a while since Americans started receiving their stimulus check money and unemployment claims only recently started to improve. Therefore, the correlation might not be as strong as one might think.
There’s still a long way before reaching the 200,000 or so weekly unemployment claims from the pre-pandemic era, but it’s definitely a step in the right direction.
It wasn’t the only good piece of economic news to come out on Thursday. As it turns out, retail sales have been surging as well. For the month of March, retail spending went up by 9.8%, the highest seen since last May. Considering most of the economy is consumer spending, stronger retail sales are a good sign that things are going back to normal.
Going forward, things should continue to get better, and not just for the reasons mentioned above. Another big spending push, this time from Biden’s infrastructure plan, will likely help prop up the economy even more. The first half of this new infrastructure plan, worth around $1.9 trillion, could come into effect sometime this year. If so, we could see jobless rates fall even further.
The only big worry for most economists and investors is whether inflation is going to pick up. So far, things have remained steady, despite the sheer volume of money being printed right now. Proxy indicators for inflation, like the 10-year Treasury yield, are hovering around 1.65%. If it starts going higher, that might be a sign to start paying attention.
