US jobless claims fall to pandemic low in tight labour market

The number of Americans filing new claims for unemployment benefits fell close to pre-pandemic levels last week as the labour market recovery continues, though a shortage of workers remains an obstacle to faster job growth.

Thursday’s weekly unemployment claims report from the United States Department of Labor, the most timely data on the economy’s health, also showed jobless benefits rolls declining to a 20-month low in early November. The economy is regaining momentum following a lull over the summer as a wave of COVID-19 infections driven by the Delta variant battered the nation.

“Demand for labour is very strong and workers are in short supply, so layoffs are very low right now,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania.

Initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 268,000 for the week ended November 13. That was the lowest level since the start of the coronavirus pandemic in the US more than 20 months ago.

Economists polled by Reuters had forecast 260,000 applications in the latest week. The smaller decline was because the model that the government uses to strip out seasonal fluctuations from the data was less generous last week.

Unadjusted claims dropped 18,183 to 238,850. The decrease was led by Kentucky, likely due to automobile workers returning to factories after temporary layoffs as motor vehicle manufacturers deal with a global semiconductor shortage. There were also big declines in Michigan, Tennessee and Ohio, states that also have a strong presence of auto manufacturers.

The decreases offset a surge in filings in California.

The seventh straight weekly decline left claims just above the 256,000 level in mid-March 2020, and in a range that is associated with a healthy labour market. Claims have declined from a record high of 6.149 million in early April 2020.

The improving economic tone was matched by other data from the Federal Reserve Bank of Philadelphia on Thursday showing an acceleration in manufacturing activity in the mid-Atlantic region this month.

Factories in the region that covers eastern Pennsylvania, southern New Jersey and Delaware reported strong order growth. They were upbeat about business conditions over the next six months and anticipated maintaining a strong pace of capital expenditures in 2022. But labour and raw material shortages persisted, leading to a rapid piling up of unfinished work, even as manufacturers increased hours for workers.

Factories continued to face higher prices for inputs, which they passed on to consumers.

Stocks on Wall Street were lower. The dollar slipped against a basket of currencies. US Treasury yields dipped.

Tight labour market

The reports added to a surge in retail sales in October and a sharp rebound in production at factories in suggesting that economic activity accelerated early in the fourth quarter after gross domestic product increased at its slowest pace in more than a year in the July-September period.

Stronger growth could spill over into 2022, with a third report from the Conference Board showing its index of Leading Economic Index jumped 0.9 percent in October after gaining 0.1 percent in September.

The labour market is getting tighter. The number of people continuing to receive benefits after an initial week of aid dropped 129,000 to 2.080 million in the week ended November 6, the claims report showed. That was also the lowest level since mid-March in 2020.

A total of 3.185 million people were collecting unemployment cheques under all programmes during the week ended October 30. Shrinking unemployment rolls raise hopes that more people will return to the labour force soon.

Millions of unemployed Americans remain at home even after the expiration of generous federal government-funded benefits, the reopening of schools for in-person learning and companies raising wages.

The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of November’s employment report.

Claims have dropped since mid-October, which would suggest stronger employment growth this month. But workers are scarce, with 10.4 million job openings as of the end of September.

The economy created 531,000 jobs in October. Employment growth has averaged 582,000 jobs per month this year and the labour force is down three million from its pre-pandemic level.