The U.S. economy is showing some scattered signs of picking up from an end-of-year slowdown, muddying President Joe Biden’s efforts to win congressional passage of a $1.9 trillion stimulus package.
New claims filed for unemployment benefits have fallen for two straight weeks, while January payrolls are forecast to rebound from a December swoon in data out on Friday. Growth at service sector companies accelerated last month to an almost two-year high and homebuilders said demand remained robust.
Selected high frequency data, such as weekly consumer confidence readings and restaurant bookings, also point to some strengthening, as virus infections ebb and business restrictions are eased.
“We’re seeing percolating growth underneath the surface,” said Gregory Daco, chief U.S. economist at Oxford Economics.
The tentative improvement comes as Biden’s mammoth package runs into opposition from some lawmakers who question whether that much support is needed on top of the more than $3 trillion the federal government has already delivered or committed.
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Jobs Report
The next major update on the economy comes on Friday with the Labor Department’s release of monthly jobs numbers for January. Economists’ estimates for the change in non-farm payrolls vary widely—from a decline of 250,000 to an increase of 400,000.
The median forecast in the Bloomberg survey calls for a 70,000 gain after December’s 140,000 drop. In November, employment increased 336,000.
Already on Wednesday, separate data from the ADP Research Institute showed that U.S. companies added more jobs than forecast in January.
Wrightson ICAP LLC chief economist Lou Crandall said the data could be skewed higher by seasonal factors that take account of normal January layoffs of retail workers hired for the end-year holidays—a development that didn’t occur at the same pace because of the pandemic.
“To the extent that job creation looks stronger it could take out some of the urgency” for passage of a broad-based stimulus plan as opposed to a more targeted one, said Michelle Meyer, head of U.S. economics at Bank of America Corp.
She cautioned though that the near-term path of the economy will be determined by the country’s progress in getting the virus under control, especially now that new, more contagious variants have shown up in the U.S.
‘Inflection Point’
The economy looks to be already benefiting from the $900 billion aid package Congress approved in late December, with credit and debit card data compiled by Bank of America showing a pickup in consumer spending.
Jefferies LLC economists Aneta Markowska and Thomas Simons see February as an “inflection point” with growth picking up steam after slowing to an annualized rate of 4% in 2020’s fourth quarter from a record 33.4% pace in the third.