If claims remain near pre-pandemic levels, it may increase the Fed’s chances of accelerating the reduction of bond purchases and raising interest rates.
Last week, applications for unemployment benefits in various US states plummeted to the lowest level since 1969. If this situation continues, it will mark the next milestone in the uneven recovery of the labor market.
Data released by the US Department of Labor on Wednesday showed that as of the week of November 20, the number of initial jobless claims in the regular state program decreased by 71,000, to 199,000 after seasonal adjustment. The median estimate in the Bloomberg Economist survey was 260,000 applications.
However, the reason for the larger-than-expected decline may be how the government adjusted the original data for seasonal fluctuations. Lou Crandall, chief economist of Wrightson ICAP, pointed out in a recent report that as the labor market is struggling to recover, seasonal factors expect unadjusted applications to increase slightly compared to the same period last year.
“This is purely a seasonal distortion. Most of it will reverse next week,” Crandall said after the release.
Before the seasonal adjustment, the number of initial jobless claims increased by approximately 18,000 last week.
US stock index futures continued to fall. After a separate report of unemployment data and durable goods orders showed a decline from the previous month, US Treasuries fell. The Bloomberg Dollar Index rose.
If the claims are indeed maintained near pre-pandemic levels, it may increase the possibility that Fed officials will accelerate the reduction of bond purchases and consider raising interest rates as soon as the purchase is completed in 2022. In three decades, employment increased in October.
As of late February 2020, before the Covid-19 outbreak in the United States, the number of applicants was 216,000, which brought applications to a peak of 6.1 million in early April 2020. Since then, as the economy reopened more broadly and Americans returned to work. In addition, federal pandemic unemployment benefits in all states ended on September 6.
Even so, millions of Americans still choose to sit on the sidelines, frustrating employers who desperately need to fill close to a record number of positions. For working parents, childcare is still a serious problem, especially in many states where cases of new coronary pneumonia appear and disrupt face-to-face learning.
The October employment report showed that the number of employed persons increased by 531,000 after the first two months of substantial revisions. Economists have called for an increase of 500,000 in November, which will be announced on December 3.