The number of Americans filing new unemployment benefits claims rose unexpectedly last week, amplified by increases in California and Virginia, but the underlying trend remained consistent with a steadily recovering labor market.
The second straight weekly increase in unemployment claims reported by the Labor Department on Thursday puzzled economists. Some pointed a finger at California forest fires, while others blamed Hurricane Ida, which destroyed U.S. offshore energy production in late August. There was little evidence that ongoing COVID-19 infections, driven by the highly contagious Delta variant of the coronavirus, were a factor.
“Some, but not all, of these latest pickups appear to be related to Hurricane Ida, as reports in Louisiana have been above their pre-storm trend in recent weeks,” said Daniel Silver, an economist at JPMorgan in New York. “But even including any storm-related allegations, the latest step in notifications has not looked particularly serious so far, and we do not believe that the recovery in the labor market has been traced at this time.”
The first demands for government unemployment benefits increased by 16,000 to a seasonally adjusted 351,000 for the week ending 18 September. Economists polled by Reuters had forecast 320,000 applications for the past week.
Unadjusted claims in California jumped 24,221 while Virginia reported an increase of 12,879. There were also notable increases in Oregon, Ohio and Kentucky. Claims in Louisiana fell and have been above their pre-hurricane trend in recent weeks.
“Perhaps fires in California and Ida in Virginia have contributed to these increases, but we do not know for sure,” said Nancy Vanden Houten, a leading U.S. economist at Oxford Economics in New York. “We expect claims to return to their downward path in the coming weeks, but data will become more erratic as claims get closer to pre – pandemic levels.”
The four-week moving average of claims, which was seen as a better measure of labor market trends as it strokes volatility from week to week, fell 750 to 335 750 last week. It was the lowest level since mid-March 2020 when mandatory closures of non-essential corporations were implemented when the nation was hit by the first wave of coronavirus cases.
The requirements have fallen from a record 6,149 million at the beginning of April 2020, but are still over 200,000–250,000 intervals that are seen as consistent with healthy labor market conditions.
The Federal Reserve on Wednesday struck a positive note on the economy, paving the way for reducing its monthly bond purchases “soon” and signaling interest rate hikes may follow faster than expected. Read more
A survey on Thursday by the computer company IHS Markit showed that business growth was growing at its slowest pace in one year in September when companies struggled with an ongoing shortage of raw materials and labor.
But the slowdown is likely temporary. A third report from the Conference Board showed that its leading economic index, a measure of future US economic activity, rose 0.9% in August after rising 0.8% in July. The conference committee said “the trend in LEI is consistent with robust economic growth during the reminder of the year.”
Shares on Wall Street traded higher. The dollar slipped against a basket of currencies. The US treasuries were lower.
WORKER CARD
Last week’s injury data covered the period during which the government surveyed employers for the non-agricultural wage component of the September employment report. The claims changed slightly between the period August and September.
Job growth slowed in August, with payrolls publishing their minimum earnings in seven months when employment was cut in the high-contact, leisure and hospitality sectors.
The claim also showed that the number of people who continue to receive benefits after the first week of assistance increased by 131,000 to 2.845 million in the week ending 11 September. Data next week on the so-called continued claims will provide more clues about how the employment went in September.
Pandemic-related factors cause a shortage of workers, which limits employment. Fed Chairman Jerome Powell told reporters on Wednesday that he expected “faster employment gains” as these factors, which include a lack of affordable childcare and fears of contracting the virus, diminished.
There were a record 10.9 million job vacancies at the end of July. The Fed estimated that unemployment would be 4.8% this year. This was an increase from 4.5% that the US Federal Reserve calculated in June. Unemployment was 5.2% in August.
There is a cautious optimism that the labor crisis will subside after the end of publicly funded unemployment benefits earlier this month, which had been blamed by companies and Republicans for encouraging the unemployed to stay at home.
At least 11,250 million people received benefits during all programs during the week ending September 4. According to Andrew Stettner, a senior fellow at the Century Foundation, more than 8 million people have lost all of their pandemic benefits.
However, it is unlikely that this would increase the labor pool. An early dismissal of extended benefits from about 25 states led by Republican governors over the summer did not lead to increased employment in those areas, and the Delta variant may cause reluctance among some people to return to work.
“For the labor market, the recovery is underway, but the shortage of supply is still a headwind,” said Rubeela Farooqi, chief economist at High Frequency Economics in White Plains, New York.
Source: Reuters (Reporting by Lucia Mutikani Editing by Chizu Nomiyama and Paul Simao)