INDICATOR: November NonManufacturing Activity and Layoff Announcements and Weekly Jobless Claims

KEY DATA: ISM (NonManufacturing): -0.7 points, Orders: -1.6 point; Employment: +1.4 points/ Layoffs: 64,797/ Claims: -75,000

IN A NUTSHELL: “The bad news on the COVID-19 front has yet to show up in the economic numbers.”

WHAT IT MEANS: The virus may be here, there and everywhere, but whatever negative impact that may have on the economy has yet to show up in the economic data. The Institute for Supply Management’s NonManufacturing Index edged downward during November, but the decline was modest and the level remains quite solid. The service segment of the economy has expanded for six consecutive months now. Order demand was strong, even if it didn’t increase as fast as it been. Maybe most importantly, firms added workers at a greater pace. That contrasted with the ISM manufacturing report, which had payrolls contracting.

The better than expected news on hiring was supported by a very good initial jobless claims report. The number of people filing for unemployment compensation fell sharply last week. These data are volatile and large increases and decreases are not unusual, so let’s not go overboard on the decline. Indeed, with the virus surging, it is unclear if that created issues for those wanting to file for unemployment checks. Businesses are running out of stimulus money and our political leaders are fiddling around while firms and households burn and that points to rising layoffs and claims in the weeks to come.

Speaking of layoffs, Challenger, Gray and Christmas reported that workforce reduction announcements fell from October and it was the second lowest number this year. Of course, that is the good way of looking at it. When you compare it to last November’s level, it’s a different story: The number was up over forty five percent compared to November 2019.

IMPLICATIONS: Will the good news on the vaccine front outweigh the bad news on the virus and political front? That is a good question. At the rate the virus is spreading, hospitals across the nation could be overwhelmed by the end of the year. And that will come when many workers on the Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation programs start to lose their benefits. The first provided benefits for people such as small business owners or gig workers who weren’t normally eligible. The second provided extended benefits. It’s estimated that about twelve million workers are at risk. Would Congress and the president let that happen? It is Washington and the next election is not for two years, so who knows what will happen? Clearly, the so-called fiscal conservatives who found in the spring that the balanced budget idea was causing their poll numbers to become unbalanced, have suddenly rediscovered the joys of claiming we cannot afford a welfare system anymore. Meanwhile, those that want to spend more continue to say no amount is too much. Well, there is something between nothing and everything, but if you expect our fearless – or maybe feckless is a better term – leaders to do the right thing, you probably just fell off the turnip truck. Maybe something will happen, but I am not overly hopeful. But if no bill, or even a modest one is passed before January, don’t be surprised if the economy starts to stall. But investors will likely assume eventually something will get done and if anything at all passes, they will probably celebrate like crazy.

Joel L. Naroff is the president and founder of Naroff Economic Advisors, a strategic economic consulting firm.