New unemployment claims rose to 853,000 in the week that ended Dec. 5, an increase of 137,000 claims since the end of March, according to the Federal National Mortgage Association.
The organization, also known as Fannie Mae, is a government-controlled company that helps provide money for the national housing market by buying residential mortgages and packaging pools of those loans for sale to investors. It is overseen by the Federal Housing Finance Agency.
The jump in new unemployment claims could signal that more job losses are on the horizon as the nation deals with a surge in COVID-19 cases, the agency said in its Dec. 11 economic and housing report.
“The recent increase in initial unemployment insurance claims suggests to us that the resurgence across the country, along with the subsequent steps taken in some localities to try to slow the spread of the virus, could be leading to a renewal of layoffs and furloughs as some businesses have to cut operating hours or close again,” the agency said.
Fannie Mae said colder weather is apparently hurting restaurants’ ability to recover from the economic fallout of the pandemic, as outdoor dining becomes less appealing to customers.
“Alternatively, it may simply reflect an abnormal seasonal pattern around temporary holiday retail and hospitality hiring, clouding the interpretation of the indicator,” the agency said. “However, if initial claims do continue to rise, there would likely be further declines in both consumer spending and sentiment.”
The report also noted that:
- The University of Michigan’s Consumer Sentiment Index, which measures the confidence of the average American consumer, rose 4.5 points to 81.4 points in its preliminary December reading.
The elements of the index that focused on current economic conditions and consumer expectations both increased, but that was due to a shift in election-related confidence based on participants’ political affiliation, according to the Fannie Mae report.
- The National Federation of Independent Businesses’ Small Business Optimism Index, which offers a snapshot of small businesses’ health, dropped by 2.6 points in November to 101.4 in the largest decline since April. The percentage of businesses that planned to expand their inventory dropped from a record- high 12% to 5%.
The share of businesses that expected the economy to improve fell by 19 percentage points to 8%, the largest decline in eight years.
NFIB’s findings emphasized the current level of economic uncertainty and could lead to weaker business investment in the last quarter of the year, Fannie Mae said.
“The preliminary December increase in consumer sentiment seems like a welcome sign, though the increase was attributed mostly to partisan shifts in economic expectations due to the election,” the agency said. “Despite the increase in sentiment, we believe that this may not actually lead to any change in spending behavior, particularly given that the survey showed no expectation of improvement in personal finances.”