The coming week will mark a crucial turn in the US economy’s direction for the coming months.
First, more than 9 million Americans will lose their federal unemployment extension benefits Three programs covering 12.1 million people end on Monday, leaving the unemployed reliant on state benefits (if they still have them) or finding a job in an economy whose August report indicated a tightening employment market.
The federal programs include Pandemic Unemployment Assistance (PUA), which provided longer-term unemployment relief for those that exhausted regular state unemployment benefits. It included Pandemic Emergency Unemployment Compensation, which are benefits for gig workers and contractors who did not qualify for regular state programs. Federal benefits included enhanced $300 per-week payments on top of regular state jobless benefits.
Job Growth Slows In August, But Unemployment Rate Falls To 5.2 Percent
Some states dropped out of the federal programs earlier this summer to incentivize workers to find jobs. But an estimated 5.4 million gig workers, contractors, and others not covered by traditional unemployment insurance are no longer covered, and 3.9 million on extended benefits are also out.
Now comes the evidence portion of several theories. Were the extended benefits keeping people from a serious job search, as some economists contend? Did the Covid-19 surge intimidate potential workers from seeking a job? And what jobs will be available in an economy that is still recovering from the pandemic, which saw a number of businesses permanently close and/or reduce work forces to accommodate the new levels of spending by consumers?
Meanwhile, traders will be watching for new inflation data at the producer level. The Labor Department’s Producer Price Index (PPI) comes out on Friday, updating the state of inflation in the US at the producer level. It will provide a clue as to whether supply chain constraints and materials shortages have continued to push prices higher.