New US jobless claims fall to lowest level since 1969

New applications for US unemployment benefits plunged last week to their lowest level in 52 years, a sign of further progress in the labour market’s uneven recovery from the depths of the coronavirus pandemic.

State unemployment offices received 184,000 initial jobless claims on a seasonally adjusted basis in the week ending December 4th, the lowest level since September 6th, 1969, the US labour department said on Thursday.

That was a decrease of 43,000 from the previous week, according to the government agency, and below the 215,000 that had been expected in a Refinitiv poll of economists.

Economists have cautioned that claims data are subject to seasonal fluctuations over the holiday period that can distort weekly readings.

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"A correction next week seems likely, but the trend in claims clearly is falling rapidly, reflecting the extreme tightness of the labour market and the rebound in GDP growth now under way," said Ian Shepherdson, economist at Pantheon Macroeconomics.

Claims fell the most in Virginia and North Carolina, according to preliminary figures that are not seasonally adjusted, while they picked up in some of the largest states, including California, Texas and New York.

Collecting benefits

There were 1.99 million Americans actively collecting benefits as of November 27th, up slightly from the 1.95 million continuing claims recorded a week earlier.

Dismissals have slowed as employers compete to hire and retain staff, with Americans quitting their jobs at historically high levels as they seek better work opportunities or turn to self-employment.

There were 11 million job openings in the US in October, the latest month for which data are available. That is the second highest on record, highlighting the difficulty businesses have in filling open positions, as pandemic-related concerns, childcare responsibilities and other issues keep workers from returning to the workforce.

Participation rates improved marginally last month, with the ratio of people employed or looking for a job rising to 61.8 per cent in November. That is still about 1.5 percentage points lower than the pre-pandemic level, but an increase from October’s threshold.

The pace of payrolls growth did slow significantly in November, although there were “notable” gains in professional and business services, transportation and warehousing, construction and manufacturing, according to the Bureau of Labor Statistics. Retail employment declined by 20,000, while the number of leisure and hospitality jobs were flat.

But the unemployment rate fell sharply to 4.2 per cent, a sign of progress in the US labour market recovery that will pave the way for the Federal Reserve to accelerate the withdrawal of its monetary stimulus at its policy meeting next week.

Inflation threat

Jay Powell, the US central bank chair, and other senior officials raised the prospect in recent weeks of speeding up its "taper" as part of a broader pivot to take on the inflation threat more aggressively.

An earlier end to the asset-purchase programme would allow the Fed to raise interest rates sooner, something 60 per cent of the 48 economists recently polled by the Financial Times and the Initiative on Global Markets at the University of Chicago Booth School of Business said would happen before the third quarter of next year.

The majority of the respondents expect the Fed to cease buying government bonds by the end of March, roughly three months earlier than its initial timeline. – Copyright The Financial Times Limited 2021