US stocks are making fresh record highs following jobless claims’ biggest drop in two months and solid ISM services data. Expectations of a holiday pandemic relief bill are offsetting the immediate pain the coronavirus is having on the economy. The US is seeing the worst of the virus and health care capacity constraints will continue to see large parts of the country follow LA and force residents to stay home and force many non-essential businesses to close. COVID-19 vaccine immunizations are expected to start soon but will not make a difference for businesses until after the first quarter. The pressure is growing for Congress to act and a deal is almost certain since Georgia is one of the states seeing the largest increases in initial claims. Republicans want to secure the Senate and with two run-off races in Georgia taking place next month, they can’t risk taking the blame for not delivering much-needed help to millions of Americans.
Jobless claims drop sharply
The weekly unemployment data statistics came in better-than-expected, but still, a large part of the economy still needs pandemic assistance. Initial jobless claims is still elevated, now at 712,000, better than both the consensus estimate of 775,000 and the revised higher reading of 787,000. Continuing claims also improved to 5.52 million, better than the eyed 5.8 million, and the prior 6.1 million. The weekly jobless data has lost some of its luster after the GAO report earlier in the week that the numbers could be inflated due to backlogs.
ISM dips but shows expansion
The ISM services index showed how resilient the economy can be. Lockdown and restrictive measures are leading to weakness but not as drastic as many anticipated. The service industry is still expanding at a modest pace and employment is growing. The headline index declined 0.7 points to 55.9, a tick above forecasts, while employment rose 1.4 points to 51.5. A slowdown is happening as business activity dropped 3.2 points to 58.0 and while new orders eased 1.6 points to 57.2. The four industries reporting contractions are arts, entertainment & recreation; other services; real estate & leasing; and educational services.
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