Evans: More fiscal relief is needed to get through pandemic

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Economic activity will likely remain suppressed, especially while Americans are waiting for more and sufficient support fiscally, according to president of the Federal Reserve Bank of Chicago Charles Evans.

“More adequate, fiscal relief is needed for us to get through this and it could be late 2022 before we reach pre-pandemic economic levels,” he said while speaking virtually to the Lakeshore Chamber of Commerce in Hammond, Indiana, Thursday afternoon.

“Households are in need of more, adequate fiscal support and economic activity is likely to remain suppressed — even more so without assistance," said Charles Evans, president of the Federal Reserve Bank of Chicago.

He believes that the unemployment rate will be somewhere around 9% by the end of the year and between 5 and 5.5% by the end of 2022.

“Households are in need of more, adequate fiscal support and economic activity is likely to remain suppressed — even more so without assistance.”

Initial claims
Initial claims lowered to a seasonally adjusted 881,000 in the week ended Aug. 29 from the previous week’s upwardly revised level of 1.011 million, originally reported as 1.006 million the Labor Department said Thursday.

Economists polled by IFR Markets projected 980,000 claims in the week.

"While the sharp decline in initial claims is welcome news, much of it can be attributed to a change in the process used to seasonally adjust the initial claims data and the impact of hurricane Laura that may have kept some claims from being filed," said Scott Anderson, chief economist at Bank of the West. "The BLS now uses an additive seasonal adjustment process instead of a multiplicative one to better account for the large distortions caused by the pandemic. However, this makes a comparison of this week’s numbers to previous weeks difficult since there was no revision of previous weeks’ claims data."

Continuing claims fell to 13.254 million on the week ended Aug. 22 from a downwardly revised level of 14.492 million a week earlier, first reported as 14.535 million.

"Continued claims are now at the lowest since early April," Anderson said.

The states showing the largest rise in claims in the week ending Aug. 22 were: California (6,562), Illinois (3,856), Pennsylvania (1,926), Kansas (1,061), and Rhode Island (503), while the states with the biggest drops were: Florida (21,127), Texas (9,248), New Jersey (5,235), Virginia (3,715), and North Carolina (3,708).

International trade
The international trade deficit widened to $63.6 billion in July from a revised $53.5 billion in June, first reported as a $50.7 billion shortfall, the Commerce Department said Thursday.

Economists estimated a $52.3 billion shortfall.

Exports in the month rose 8.1%, or $12.6 billion, while imports increased 10.9%, or $22.7 billion higher than the prior month.

Year-to-date, the deficit is 1.8% higher than it was in the same period of 2019.

ISM non-manufacturing PMI
ISM’s non-manufacturing sector index slipped to 56.9% in August from 58.1% in July, according to data released Thursday.

Economists expected the index would come in at 57.0%.

The business activity/production index decreased to 62.4% from 67.2%. The new orders index fell to 56.8% from July’s 67.7%. The prices index gained to 64.2% from 57.6%, while inventory sentiment was higher to 52.5% from 50.0% and the employment index climbed to 47.9% from 42.1%.

The supplier deliveries index moved up to 60.5%, from 55.2% in July. Inventories dropped to 45.8% from 52.0%. Backlog of orders increased slightly to 56.6% from 55.9%. New export orders rose to 55.8% from 49.3%.

Productivity and Costs
Labor productivity in the nonfarm business sector rose 10.1% in the second quarter and unit labor costs were 9% higher, according to the U.S. Bureau of Labor Statistics reported Thursday.

Economists anticipated productivity to be up 7.4% and unit labor costs 12.1% higher.

The increase in nonfarm business sector labor productivity is the largest quarterly increase since the first quarter of 1971, when output per hour increased 12.3%, according to the release.

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Economic indicators Monetary policy Jobless claims Charles Evans Federal Reserve Bank of Chicago