Yahoo Finance 'Slowing of momentum' in labor market may be a signal of small business closures: economist
“What we're seeing in the labor market is a slowing of momentum,” says Ernie Tedeschi, Evercore ISI managing director and policy economist.
The latest jobless claims unexpectedly rose last week, hitting the highest level since mid-August.
“We're not backtracking the progress we've made since April,” said Tedeschi. However monthly and weekly data paints a “picture of an improvement that is still positive, but gradually slowing.”
As Congress stalemates on a stimulus package, small businesses may be the ones going under from looking at the unemployment claims data.
“My greatest fear is the fact that we had 900,000 people filing for regular unemployment insurance claims and another 400,000 filing for pandemic unemployment assistance. Here we are in October and we're still at 1.3 million people filing for these claims for the first time,” he added.
“That makes me worry, that that's a signal of small business closures,” said Tedeschi.
He says a stimulus would provide a boost of momentum heading into 2021, protect small businesses and cuts by states and local governments, as well as prevent those unemployed from dipping into savings.
“Once they're out of savings, then they're going to have to make cuts to their family spending, and that will affect the economy,” he added.
He also makes a case for lawmakers to act sooner, rather than later.
“Once a business fails, once a person is unemployed, it becomes much harder to start that business up again, to rehire that person,” said Tedeschi.
“If we can prevent these layoffs from happening, prevent some businesses from going under, by giving them aid this key point in time ... that ounce of prevention would go along way,” he added.
Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre
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