The recovery in the US labor market is on track as weekly unemployment claims approach 18-month lows

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

The Department of Labor’s weekly unemployment claims report on Thursday, the most timely data on the health of the economy, also showed the number of people registering state unemployment to levels last seen in mid-March 2020 , when the economy broke away from the mandatory shutdowns of non-essential companies to curb the first wave of COVID-19 cases.

The continuing downward trend in layoffs followed after Wednesday’s report showed that job offers had reached a new record in July, indicating a tightening labor market, which some economists argued could put pressure on the Reserve Federal to announce when it would begin reducing its huge monthly bond purchase program. Fed Chairman Jerome Powell has given no sign of when the U.S. central bank plans to cut its asset purchases beyond saying it could be “this year.”

“There is likely to be a fierce debate at the next Fed meeting on the degree of labor market tension, but if policymakers focus on the most timely data we have, they will realize that the labor market is ready of meeting its stricter requirements the criteria for a rise in interest rates let alone the trigger for volume reduction, ”said Chris Rupkey, chief economist at FWDBONDS in New York.

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

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

The second consecutive weekly decline in claims occurred even as requests increased in Louisiana after Hurricane Ida devastated U.S. extraterrestrial energy production and wiped out energy. There were also notable increases in California, Virginia and Michigan. But those rises were offset by large declines in demand in Florida, Georgia, New York, Missouri and Tennessee.

Claims have fallen from a record 6.14 billion in early April 2020. They closed at the top of the 200,000-250,000 range considered consistent with healthy labor market conditions.

Wall Street shares were trading higher. The dollar fell against a basket of currencies. US Treasury prices rose.

TREND DOWN

The continuing downward trend in claims suggested that the labor market remained, despite the resurgence of infections, driven by the Delta variant of the coronavirus. The increase in cases helped curb employment growth in August, with non-farm payrolls rising just 235,000, the smallest gain since January. Payrolls rose 1,053 million in July. Read more

“There has been no recovery in job separations, even when the economy is enduring a new wave of new virus infections,” said Conrad DeQuadros, Brean Capital’s senior economic adviser in New York.

Job offers reached 10.9 million at the end of July. The difficulty of the labor market was highlighted by the Fed’s Beige Book report on Wednesday, based on information gathered on or before August 30, which showed that “all districts observed an extensive labor shortage that limited employment and, in many cases, hindered business activity “. Read more

About 8.4 million people are officially unemployed. This labor market imbalance has been attributed to a lack of affordable child services, fears of contracting the coronavirus, generous unemployment benefits funded by the federal government, as well as pandemic-related retirements and career changes.

There is cautious optimism that the labor crisis will ease from September after the expiration of government-funded unemployment benefits on Monday, including a $ 300 weekly grant, blamed on businesses and Republicans for deterring the unemployed from looking for work.

The new school year is underway, most school districts offer face-to-face learning.

But the Delta variant could cause some people to be reluctant to return to the workforce. Nor is it guaranteed that the expiration of the extended benefits will force the unemployed to look for work. The early completion of these benefits by about 25 states led by Republican governors over the summer did not expand the job market.

The claims report also showed that the number of people still receiving benefits after a first week of aid fell from 22,000 to 2,783 million in the week ended August 28, the lowest level since mid-March 2020.

At least 11,930 million people received benefits in all programs during the week ending August 21. According to Andrew Stettner, a senior member of The Century Foundation, more than 8 million people lost all of their pandemic benefits on Monday and another 2.1 million saw their profits fall $ 1,200 a month.

This so-called unemployment cliff could help curb economic growth this quarter, although consumer spending is likely to remain sustained by the strengthening of the labor market and the strong wage gains that accompany it.

Households also accumulated more than $ 2 trillion in savings during the pandemic and have seen their wealth increase thanks to house prices and the stock market.

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

Economists have lowered their growth estimates for the third quarter after lousy car sales in August, boosting COVID-19 cases and fading the fiscal stimulus.

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

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