First-time unemployment claims hit a pandemic low last week: The number of people filing for jobless benefits was 340,000. On one hand, businesses seem to be staving off layoffs, even as COVID-19 infections have resurged in many areas. On the other hand, the latest consumer indicators have been wavering as cases of the coronavirus delta variant rise.
There’s one big obvious connection between consumer confidence and lower unemployment claims. When people are working, they feel OK about spending their paychecks, says Lynn Franco with The Conference Board.
“So as long as we see consumers somewhat upbeat about their job, they’re much more willing to make purchases, especially discretionary purchases,” Franco said.
So even though we’re hearing that discretionary spending on travel and entertainment have slowed down because of the delta variant, lower jobless claims are a good signal.
However, Brad McMillan with Commonwealth Financial Network said the drop in unemployment claims has slowed.
“And that’s despite the fact that we’re seeing strong hiring, we’re seeing strong demand. So that number is a little bit misleadingly cheerful,” he said.
Keep in mind consumer spending on the whole could change once federal pandemic unemployment benefits expire on Labor Day.
“We’re not really out of the woods yet, for a lot of folks who haven’t gone back to work,” said Rebecca Dixon, executive director of the National Employment Law Project. “And knowing that 70% of our economy is consumer spending, I just don’t see any way that there can’t be an impact on the recovery.”
And those $600 weekly pandemic benefits will end for about 7.5 million people next week — gig workers, those who used up state benefits, or parents who couldn’t work for health or child care reasons.