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| - Downbeat statements by US lawmakers dampened expectations for the passage of more fiscal stimulus as government data released Thursday showed continuing strain on consumers impacted by the coronavirus downturn. Democratic House Speaker Nancy Pelosi was due to speak again with Treasury Secretary Steven Mnuchin, aiming to break a weeks-long deadlock on passing more stimulus for the world's largest economy, which has seen massive layoffs and a sharp contraction in annualized GDP due to business shutdowns to stop Covid-19. Talks that had petered out with Democrats and Republicans unable to agree on how much to spend resumed this week, again creating expectations that a follow-up bill for to the $2.2 trillion CARES Act could be passed. However Pelosi said the two sides were "way off" on certain issues though she was still optimistic a deal could be done. She said the House would be voting on a $2.2 trillion Democratic aid proposal on Thursday. President Donald Trump's spokeswoman Kayleigh McEnany rejected that bill, saying the White House was ready to back spending $1.6 trillion, including $250 billion for state and local governments and $150 billion for schools. "Nancy Pelosi is not being serious. If she becomes serious, then we can have a discussion here," McEnany said. Major airlines began laying off workers on Thursday, the expiration of a period in which they promised not to do so in exchange for receiving federal aid under the CARES Act. Data released the same day showed the continued impact of the downturn as well as the expiration in August of $600 extra weekly payments to the unemployed. The Labor Department reported 837,000 new jobless claim filings last week, down 36,000 from the week prior but still well above the single worst week of the 2008-2010 global financial crisis. The Commerce Department also reported a 1.0 percent rise in personal consumption expenditures (PCE) even as income fell 2.7 percent in August, fueled by consumers dipping into their savings after the extra unemployment benefits ended. US air carriers facing sharp falls in demand for travel were given billions of dollars under the CARES Act in exchange for not laying off workers until October. With that deadline passed and aid requested by unions and the airlines themselves not forthcoming from Congress, American and United airlines were the first to announce cuts, saying they would begin furloughing 19,000 and 13,000 workers, respectively. That grim news was accompanied by an announcement from Allstate that it would eliminate 3,800 jobs in a cost-cutting move. The job cuts underscore how, despite the improvement in the unemployment rate -- which spiked to 14.7 percent in April after the business shutdowns but then moderated to 8.4 percent in August -- layoffs remain a continued threat. The jobless claims data for the week ended September 26 did indicate a downward trajectory in new filings. But they also showed that the number of people filing under the Pandemic Unemployment Assistance (PUA) program for workers who aren't normally eligible rose by more than 34,000 to 650,120. The data was complicated by most-populous state California's decision to pause processing claims for the two weeks to October 3 to address a backlog, meaning the level the state reported Thursday was the same as the previous week and will be revised later. The four-week moving average of new regular claims is decreasing by less than 12,000 per week, and at that rate, Ian Shepherdson of Pantheon Macroeconomics said claims are set to reach 665,000 per week -- the level of the worst single week of the global financial crisis -- in January of next year. "The labor market clearly is still in turmoil," he said. The Commerce Department data showing a larger than expected fall in income and rise in spending provided a worrying explanation: American consumers who benefited from the CARES Act are relying on their savings. The savings rate fell in August to 14.1 percent from 17.8 percent in July, the data said, which Gregory Daco of Oxford Economics warned was "not a sustainable reality." "Needless to say, a lot rides on Congress' shoulders in supporting the economy into 2021," he said. The Institute for Supply Management separately released its September report on the manufacturing industry, showing it continuing its recovery from downturn earlier this year albeit at a slightly slower pace. The index's reading of 55.4 percent was a slight drop from the 56.0 percent in August, with the industry remaining in expansionary territory but held back by a fall in new orders and a slight decrease in production. cs/ft
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