WASHINGTON, Dec 23 (Reuters) – The number of Americans filing new claims for unemployment benefits remained below pre-pandemic levels last week, while consumer spending rose solidly, putting the economy on the right track for a strong end to 2021.
But pressures on prices continue to mount and a reading of core inflation recorded its biggest annual rise since the 1980s in November.
Thursday’s reports came as the nation faces a resurgence in COVID-19 infections, driven by the delta and omicron variants, which could hamper economic growth in the first quarter.
Initial claims for state unemployment benefits were unchanged at 205,000, based on seasonally adjusted figures, for the week ending Dec. 18, the Labor Department said. Earlier this month, orders fell to a level last seen in 1969.
Economists polled by Reuters had forecast 205,000 requests for the past week. Orders have dropped from a record 6.149 million in early April 2020.
Requests generally increase during cold weather months, but an acute worker shortage has disrupted that seasonal pattern, resulting in fewer seasonally adjusted orders in recent weeks. Discounting weekly volatility, the labor market is tightening, with the unemployment rate at a 21-month low of 4.2%.
“The normal backlog of layoffs in December has been more subdued than usual this year, resulting in historically low levels of applications on a seasonally adjusted basis,” said Lou Crandall, chief economist at Wrightson ICAP in Jersey City.
A separate Commerce Department report on Thursday showed that consumer spending, which accounts for more than two-thirds of US economic activity, rose 0.6% last month.
October data was revised upwards and shows that spending rose 1.4% instead of 1.3%, as previously reported. Economists polled by Reuters had forecast that consumer spending would rise 0.6% in November.
Services like travel during the Thanksgiving holidays accounted for much of the increase in consumer spending. Product outlays were weaker after Americans started their Christmas shopping early to avoid empty shelves due to shortages.
The economy grew at an annualized rate of 2.3% in the third quarter and consumer spending increased at a rate of 2.0%. Growth forecasts for the fourth quarter oscillate at a maximum of 7.2%. For all of 2021, the economy is expected to have expanded 5.6%, which would be the fastest pace since 1984, according to a Reuters survey of economists. US GDP contracted 3.4% in 2020.
Inflation accelerated further in November. The Personal Consumption Expenditure (PCE) price index, excluding volatile food and energy components, rose 0.5% after posting a similar gain in October.
In the 12 months to November, the so-called core PCE price index accelerated by 4.7%. It was the largest increase since the 1980s and followed a 4.2% year-on-year increase in October.
(Reporting by Lucia Mutikani. Edited in Spanish by Marion Giraldo)