US weekly jobless claims hit 19-month low as labor market tightens
- Weekly jobless claims drop from 6,000 to 290,000
- Continuing claims drop from 122,000 to 2.481 million
- The activity of factories in the middle of the Atlantic slows down; robust order growth
- Existing home sales jump 7% in September
WASHINGTON, Oct.21 (Reuters) – The number of Americans filing new jobless claims fell to a 19-month low last week, indicating a tightening labor market, although a shortage of workers could maintain the moderate pace of hiring in October.
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 unemployed fell significantly earlier this month. There is cautious optimism that the expiration of federally funded benefits on September 6 will expand the labor pool in the coming months.
“Hiring demands remain strong and the shortage of potential workers should make employers think twice about cutting payrolls,” said Jim Baird, director of investments at Plante Moran Financial Advisors in Kalamazoo, Michigan.
Initial claims for state unemployment benefits fell from 6,000 to 290,000 seasonally adjusted for the week ended October 16, the lowest level since mid-March in 2020, when the country was at the start of the COVID-19 pandemic.
It was also the second week in a row that claims remained below 300,000, as employers retained their workers in the face of a severe labor shortage. Economists polled by Reuters had forecast 300,000 claims for last week.
Unadjusted claims, which economists say provide a better reading of the labor market, fell from 24,293 to 256,304 last week. A jump of 17,570 deposits in California was offset by notable declines in Virginia, Michigan, Pennsylvania, Texas, New York, Kentucky and the District of Columbia.
Claims have declined from a record 6.149 million at the start of April 2020. A range of 250,000 to 300,000 claims is considered consistent with a healthy labor market. The number of people continuing to receive benefits after a first week of aid fell from 122,000 to 2.481 million in the week ending October 9. It was also the lowest level since mid-March in 2020.
Stocks on Wall Street were mixed. The dollar (.DXY) remained stable against a basket of currencies. US Treasury prices have fallen.
The pandemic upset the dynamics of the labor market, leading to 10.4 million vacancies at the end of August, even as around 7.7 million people were officially unemployed in September. A range of factors have been blamed for the disconnect, including lack of childcare, increased unemployment benefits, early retirements and career changes.
Although schools have reopened for in-person learning and expanded unemployment benefits have ended, the workforce has not been boosted last month. About 183,000 people have dropped out, leading to a decline in the labor force participation rate, or the proportion of working-age Americans who have or are looking for a job.
But with the number of people receiving unemployment checks under government and federal programs having fallen by about 9 million since the start of last month, economists are betting they will start to return to the workforce. The total number of people receiving unemployment checks under all programs fell from 369,992 to 3.279 million in the week ended Oct. 2.
“Presumably many of these workers will be looking for work soon, if they haven’t already started it will help alleviate some of the current labor shortages in the economy,” said Gus Faucher, chief economist. at PNC Financial in Pittsburgh, Pennsylvania. .
The claims data covered the period in which the government surveyed employers for the non-farm wage component of the October employment report. Deposits fell significantly between the survey weeks of September and October, implying a pickup in employment growth this month.
Claims data, however, has not been a reliable indicator of job growth over the past year due to the upheaval caused by the pandemic. Non-farm payrolls increased by just 194,000 jobs in September, the least in nine months.
Labor shortages occur in all industries causing traffic jams in ports and hurting production in factories, while leaving shelves empty and stoking inflation.
The worker shortage was echoed on Wednesday by the Federal Reserve’s “Beige Book” report containing anecdotal information on business activity gathered from contacts nationwide, which showed that “employment increased at a modest to moderate rate in recent weeks, as demand for workers was high, but labor force growth was held back by a low supply of workers. ”Read More
Shortages of labor and raw materials led economists to anticipate that gross domestic growth slowed to an annualized rate of 0.5% in the third quarter after accelerating to a pace of 6.7% during from April to June.
The slowdown in activity due to the input crisis was underscored by a separate Philadelphia Fed survey on Thursday that showed manufacturing in the mid-Atlantic regions grew at a moderate pace in October.
Factories in the region that covers eastern Pennsylvania, southern New Jersey and Delaware saw strong order growth as well as an accumulation of unfinished jobs. They were optimistic about economic conditions over the next six months and expected increased capital spending in 2022.
The slowdown in growth was also highlighted by a third Conference Board report showing that its index of key economic indicators rose 0.2% in September, the smallest gain in seven months, after increasing by 0. 8% in August.
“Anecdotal evidence suggests that the bottlenecks are not easing, and survey data indicates that many companies expect the disruptions to last through 2022,” Evan Karson, economist at Moody’s Analytics told West Chester, Pennsylvania.
There was, however, some good news from the housing market. A fourth report from the National Association of Realtors showed that sales of existing homes hit an eight-month high in September. But the share of first-time buyers was the lowest in six years as tight inventories kept home prices high. Read more
“The shortage of homes for sale, relative to the strong demand for owner-occupied homes, will continue to drive up home prices,” said David Berson, chief economist at Nationwide in Columbus, Ohio. “It will be difficult for sales of existing homes to increase significantly in the coming months.”
Reporting by Lucia Mutikani Editing by Paul Simao
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