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The
plunge reported by the Labor Department in its weekly
unemployment claims report on Thursday was, however, probably
exaggerated by difficulties adjusting the data for seasonal
fluctuations around this time of the year.
The claims report, the most timely data on the economy's health,
followed on the heels of news last week that the jobless rate
fell to a 21-month low of 4.2% in November. Data on Wednesday
showed there were 11 million job openings at the end of October
and Americans quit jobs at near-record rates.
"While the latest data should be taken with a grain of salt
given seasonal adjustments, we may be entering a stretch when
lower-than-average layoffs continue until the 'Great
Resignation' fades," said Robert Frick, corporate economist at
Navy Federal Credit Union in Vienna, Virginia.
Initial claims for state unemployment benefits tumbled 43,000 to
a seasonally adjusted 184,000 for the week ended Dec. 4, the
lowest level since September 1969. Economists polled by Reuters
had forecast 215,000 applications for the latest week.
Claims have declined from a record high of 6.149 million in
early April of 2020. Applications typically increase as the
weather gets colder, but economists say this seasonal pattern is
not holding because of a tightening labor market.
Unadjusted claims rose 63,680 to 280,665 last week, a smaller
increase than had been anticipated.
"The seasonal factors had expected an increase of 106,047 (or
48.9 percent) from the previous week," the Labor Department said
in its report.
"The big jump in filings before seasonal adjustment was not
fully realized, and the tight labor market may be limiting the
amount of seasonal layoffs that take place around this time of
year relative to norms," said Daniel Silver, an economist at
JPMorgan in New York.
U.S. stocks were trading lower after three straight days of
gains. The dollar rose against a basket of currencies. U.S.
Treasury prices were mostly higher.
EXTREMELY LOW LAYOFFS
Filings increased sharply in California, New York, Texas and
Michigan. There were also notable rises in Minnesota, Illinois,
Indiana, Oregon, Wisconsin, and Pennsylvania. Some of these
states are experiencing a resurgence in COVID-19 infections.
Claims fell significantly in Virginia and North Carolina.
The four-week moving average of initial claims, considered a
better measure of labor market trends as it irons out
week-to-week volatility, fell 21,250 to 218,750, the lowest
level since March of 2020. It matches the average that prevailed
from 2018 to 2019.
"The labor market continues to tighten on almost every metric
and in almost every report that pertains to jobs," said Conrad
DeQuadros, senior economic advisor at Brean Capital in New York.
"Layoffs are running at extremely low levels and consistent with
a tight labor market when the unemployment rate averaged 3.8%."
Labor market tightness bolsters Federal Reserve Chair Jerome
Powell's view that the U.S. central bank should consider
speeding up the winding down of its massive bond purchases at
its policy meeting next week. It also puts an early Fed interest
rate increase on the table.
The claims data aligns with other reports on consumer spending,
manufacturing and services industries activity that have
suggested the economy was regaining steam in the fourth quarter
after a lull in the July-September period.
A separate report from the Commerce Department on Thursday
showed the accumulation of wholesale inventories accelerated in
October, supporting the stronger growth expectations.
Fourth-quarter GDP growth estimates are as high as an 8.6%
annualized rate. The economy grew at a 2.1% pace in the third
quarter.
But the spread of the Omicron variant of COVID-19 poses a risk
to the economic outlook. While little is known about the impact
of the new variant, some slowdown in hiring and demand for
services is likely, based on the experience with the Delta
variant, which was responsible for the slowest economic growth
pace in more than a year last quarter.
Rising coronavirus infections could also delay the much
anticipated return to the labor force by the millions of
unemployed Americans, some of whom started trickling back in
November. The workforce remains 2.4 million below its
pre-pandemic level even as generous federal government-funded
benefits have expired and schools reopened for in-person
learning. Companies are also raising wages.
The claims report showed continuing claims rose 38,000 to 1.992
million in the week ended Nov. 27. There were 1.948 million
people receiving benefits under all programs in the week ended
Nov. 20, down 350,527 from the prior week.
Worker shortages are hampering job growth. The government
reported last week that nonfarm payrolls increased by 210,000
jobs, the fewest since last December.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
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