Last week, U.S. jobless claims dropped to their lowest levels in over 50 years as the number of unemployed Americans continues to decline. On Thursday morning, the Labor Department released the updated reports that show new jobless claims fell for the second straight week. New claims dropped to 187,000 last week, which is the lowest since September 1969. Additionally, continuing claims also declined to 1.35 million, which is the least since January 1970.
New applications for unemployment benefits continue to drop and the numbers of those that are enrolled continue to shrink as well. The trend points to an increase in employment as demands for labor market slack rapidly decline and keep wage inflation on the rise.
What You Need To Know
- New jobless claims for U.S. unemployment benefits fell to a 52-year low last week.
- Continued claims also fell and are at their lowest since 1970.
- Labor market slack continues to decline as wage inflation rises.
- In February, the unemployment rate dropped to a two-year low of 3.8%.
- In early April 2020, unemployment claims hit a record high of 6.149 million.
Jobless Claims Reach Record Highs In 2020, Have Declined Ever Since
Back in early April 2020, new unemployment claims shot to a record-setting high of 6.149 million applications. Obviously, the numbers were inflated as the nation navigated the Covid-19 pandemic and many businesses closed their doors either temporarily or permanently. As the country continues to adjust to post-pandemic life, and businesses get back to normal operations, jobless claims are trending downward.
For the week ending March 19, initial jobless claims declined by 28,000 to a seasonally adjusted 187,000. Recently, Reuters polled economists who forecasted a minimum of 212,000 applications for last week. However, the current state of the labor market exceeded economists’ predictions as many companies are still desperate for workers.
In fact, at the end of January, American job openings reached 11.3 million. That includes a record-setting 1.8 open positions available on average for each unemployed citizen. The overwhelming demand for labor along with a decrease in the supply of available workers has boosted wage growth as well.
Higher wages have helped provide needed funds for Americans as gasoline and grocery prices soar. In addition, the wage growth continues to feed into high inflation as the labor market currently stands as one of the U.S. economy’s strengths. Yahoo! Finance reporter Emily McCormick spoke to FWDBONDS chief economist Chris Rupkey earlier today.
“Net, net, no one is losing their job with companies holding on tight to their workers despite the worrying signs of recession on the horizon from rising gasoline prices, stock market corrections, and the horrific World War II photos coming out of Europe,” Rupkey explained. “No wonder worker wages are soaring as company managers offer carrots where they used to give out sticks. The omicron variant is having no impact on the labor market and the anecdotal reports of massive labor market shortages are very, very real.”
Russia-Ukraine Conflict Hasn’t Impacted Labor Market
As Rupkey mentioned, Russia’s ongoing invasion of Ukraine worried economists among other factors, and rightfully so. It’s clear the war in Eastern Europe has impacted U.S. gasoline prices that reached record highs in recent weeks. The war has also put a strain on global supply chains. However, there are zero signs that war has impacted the labor market, which is evidenced in the declining jobless claims.
The Labor Department’s jobless claims report also highlighted some other telling statistics. The number of citizens who have already received benefits also decreased by 67,000 to 1.35 million in the week ending March 12. Further, continued claims dropped between February and March. And the unemployment rate fell to 3.8% in February – the lowest percentage in the last two years.
Last week, the Federal Reserve increased its policy interest rate by 25 basis points. That’s the first rise in the federal policy interest rate in more than three years. The last interest rate hike came back in 2018. On Monday, Fed Chair Jerome Powell addressed the increase. He said the U.S. central bank must move “expeditiously” to raise rates. Powell also said the Federal Reserve may have to act “more aggressively” to keep high inflation from becoming the norm.
St. Louis Fed President Jim Bullard was the only official to disagree with the 25-point rise. Last week, Bullard actually called for a more aggressive 50 basis point rate hike. He pointed to the strength of the U.S. labor market even in the middle of the highest rates of inflation in decades as to the justification for his vote.
“This above-trend growth is likely to strengthen labor markets further, and U.S. labor markets are today already stronger than they have been in a generation,” Bullard wrote in a statement.