The economy’s ability to withstand a surge in coronavirus cases will become clearer Thursday morning when the government reports the latest figures for new jobless claims.
Applications for unemployment benefits have risen in three of the last four weeks, an indication of the toll that consumer caution and new restrictions on businesses have taken on economic activity even as vaccines to combat the virus are being rolled out.
Indoor dining was halted on Monday in New York City, paralleling new limits in California and other large states. At the same time, health advisories against travel have crippled airlines, hotels, rental car agencies and other service industries, and the situation is not expected to improve until vaccinations are more widespread in the spring.
“There is some underlying weakness in the labor market that has come across in the last few weeks, and it is tied to the pandemic,” said Gus Faucher, chief economist at PNC Financial Services. “It’s rising caseloads, it’s consumer reluctance to go and spend, and it’s government restrictions.”
With the weakening economy as the backdrop, Republican and Democratic leaders in Congress continued talks on Wednesday on another pandemic relief bill, something that economists have warned is overdue. Without action, two key programs for unemployed workers will expire this month, underscoring the predicament of the jobless.
Data released on Wednesday showed a 1.1 percent drop in retail sales in November, a disappointing start to the crucial holiday season. Mr. Faucher expects economic growth to be weak for the next few months before picking up later in 2021.
“Until we get a lot of people vaccinated, the economy will face a difficult test,” he said. “I don’t know if we will see an outright contraction or the loss of jobs, but the pace of improvement will slow markedly.”