The impact of new coronavirus shutdowns was felt across the U.S. this week as new jobless claims hit an unexpected 965,000 for the first week in January, the U.S. Department of Labor reported Thursday.
The number was 23% higher than the previous week and the highest since August, The Hill reported. It matched up with the December jobs report, which also showed jobs being lost.
Economists had only predicted 800,000 new jobless claims for the week.
A weak start to 2021
“This is bad news for the economy heading into 2021,” global economist at The Economist Intelligence Unit Cailin Birch said.
“The fact that benefits claims are increasing suggests that the economy may lose jobs again in January, as the number of coronavirus cases continues to surge, weighing heavily on businesses,,” she continued.
Birch does not think the unemployment rate will drop below 6% in 2021, even with the likelihood that tens or hundreds of millions of Americans will be vaccinated for the coronavirus during the year.
Bankrate senior economic analyst Mark Hamrick said, “This reminds us that the economic crisis has not gone away, far from it, at a time when multiple crises have been vying for our attention. It hasn’t helped that administration of COVID-19 vaccines has been slow to gather momentum since the pandemic is at the epicenter of the economy’s ills.”
Biden’s impact on economy
Next week, Joe Biden will be inaugurated, and his administration may put even more stress on the economy as his policies begin to take effect with the support of a Democrat-controlled House and Senate.
Biden has said he plans to raise taxes, pursue universal government-funded health care, and funnel trillions into initiatives aimed at mitigating climate change, all of which will discourage job creation and entrepreneurship.
It will be a sharp reversal from President Donald Trump’s policies, which were designed to grow jobs and incomes, both before and after the coronavirus forced shutdowns that lasted for months in some states.
Biden’s burdensome plans could make it harder for the country to recover from the impact of the coronavirus on the economy, and lead to stagnation.
In addition, Biden plans to continue high levels of government spending on the coronavirus, which could lead to inflation and a devaluing of our currency that could cause even more economic problems for many lower and middle income families and individuals.