U.S. labor market recovery on track as weekly jobless claims near 18-month low

WASHINGTON, Sept.9 (Reuters) – The number of Americans filing new jobless claims fell to its lowest level in nearly 18 months last week, offering more evidence that job growth was hampered by labor shortages rather than by cooling demand for workers.

The Department of Labor’s weekly jobless claims report on Thursday, the most current data on the health of the economy, also showed that the number of people registered as unemployed in the state was plunging to levels seen for the last times in mid-March 2020, when the economy was reeling from mandatory shutdowns of non-essential businesses to slow the first wave of COVID-19 cases.

The continued downward trend in layoffs followed a report on Wednesday showing that job vacancies hit a new record in July, indicating a tightening in the labor market, which some economists say could put pressure on the Federal Reserve to that she announced when she would start. cut back on his huge monthly bond buying program. Fed Chairman Jerome Powell has given no signal when the US central bank is considering cutting asset purchases beyond saying it could be “this year.”

“There will likely be a fierce debate at the next Fed meeting about the tension in the labor market, but if policymakers focus on the most current data we have, they will realize that the labor market is about to meet their tougher demands – the criteria for an interest rate hike, not to mention the trigger for the cut, “said Chris Rupkey, chief economist at FWDBONDS in New York City.

Initial claims for state unemployment benefits fell from 35,000 to 310,000 seasonally adjusted for the week ended September 4, the lowest level since mid-March 2020. Economists polled by Reuters had forecast 335,000 claims for the last week.

Unadjusted claims, which economists say provide a better reading of the labor market, fell from 8,005 to 284,287 last week.

The second consecutive weekly drop in claims came even as filing claims rose in Louisiana after Hurricane Ida devastated offshore power generation in the United States and cut power. Notable increases were also recorded in California, Virginia and Michigan. But those increases were offset by sharp declines in claims in Florida, Georgia, New York, Missouri and Tennessee.

Claims fell from a record 6.149 million in early April 2020. They are approaching the upper end of the 200,000 to 250,000 range considered consistent with healthy labor market conditions.

Wall Street stocks were trading higher. The dollar plunged against a basket of currencies. US Treasury prices have gone up.

DOWNWARD TREND

The continuing downward trend in claims suggests that the job market is resilient, despite a resurgence in infections, driven by the Delta variant of the coronavirus. The increase in cases helped dampen job growth in August, with the non-farm workforce increasing by only 235,000, the smallest gain since January. The payroll jumped 1.053 million in July. Read more

“There has been no resumption in layoffs even as the economy suffers another wave of new viral infections,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York City.

Job vacancies hit a record 10.9 million at the end of July. The tension in the labor market was underscored by the Fed’s Beige Book report on Wednesday, based on information collected no later than August 30, which showed that “all districts have noted significant labor shortages which restricted employment and, in many cases, hampered commercial activity “. Read more

About 8.4 million people are officially unemployed. This labor market imbalance has been attributed to a lack of affordable child care, fears of contracting the coronavirus, generous federally funded unemployment benefits, and pensions and career changes linked to the pandemic. .

There is cautious optimism that the labor shortage will ease from September after government-funded unemployment benefits expired on Monday, including a $ 300 weekly subsidy, blamed by businesses and Republicans for dissuading the unemployed from looking for work.

The new school year is underway and most school districts offer in-person learning.

But the Delta variant could cause reluctance among some people to return to the workforce. There is also no guarantee that the expiry of the extended benefits will force the unemployed to look for work. An early termination of those benefits by about 25 states led by Republican governors over the summer did not expand the labor pool.

The claims report also showed that the number of people continuing to receive benefits after a first week of aid fell from 22,000 to 2.783 million during the week ended August 28, the lowest level since mid-March 2020.

At least 11.930 million people were receiving benefits under all programs during the week ended August 21. According to Andrew Stettner, senior researcher at the Century Foundation, more than 8 million people lost all of their benefits in the event of a pandemic, and 2.1 million more saw their benefits. down $ 1,200 per month.

This so-called unemployment insurance cliff could help dampen economic growth this quarter, although consumer spending is expected to remain supported by the strengthening labor market and accompanying sharp wage increases.

Households also racked up more than $ 2 trillion in savings during the pandemic and saw their wealth increase thanks to record stock market and house prices.

“This will weigh on growth, but consumer spending will continue to rise, just at a slightly slower pace,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania.

Economists cut their growth estimates for the third quarter after dismal auto sales in August, soaring COVID-19 cases and weakening fiscal stimulus.

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci

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