US weekly jobless claims fall to pandemic low
In a sign the US jobs market recovery is accelerating, weekly claims drop to a pandemic low of 498,000 last week
Washington — The number of Americans filing new claims for unemployment benefits fell below 500,000 last week for the first since the Covid-19 pandemic started more than a year ago, signalling the labour market recovery had entered a new phase amid a booming economy.
That was reinforced by other data on Thursday showing US-based employers in April announced the fewest job cuts in nearly 21 years. The reports added to other upbeat employment data in suggesting that the economy enjoyed another strong month of job growth in April.
But the labour market is not out of the woods yet, with about 16.2-million people still collecting unemployment cheques.
“Although unemployment remains elevated, the labour market is rapidly recovering,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania.
Initial claims for state unemployment benefits fell 92,000 to a seasonally adjusted 498,000 for the week ended May 1, the labour department said. That was the lowest since mid-March 2020, when mandatory shutdowns of non-essential businesses were enforced to slow the first wave of Covid-19 infections.
Economists had forecast 540,000 applications for the latest week. The decline in claims was led by Virginia, Florida, New York and California.
The government has provided nearly $6-trillion in pandemic relief over the past year. Americans over the age of 16 are now eligible to receive the Covid-19 vaccine, leading states including New York, New Jersey and Connecticut to lift most of their coronavirus capacity restrictions on businesses.
The huge fiscal stimulus and rapidly improving public health situation are unleashing pent-up demand, resulting in a scramble for workers by companies.
Reports on Wednesday showed private employers hired the most workers in seven months on April, while a measure of services industry jobs rose to more than a two-and-a-half year high. Consumers' perceptions of the labour market are the strongest in 13 months.
Stocks on Wall Street were trading mostly lower, led by vaccine makers after US President Joe Biden announced plans to back intellectual property waivers on Covid-19 shots. The dollar fell against a basket of currencies. US Treasury prices rose.
In a separate report on Thursday, global outplacement firm Challenger, Gray & Christmas said layoffs announced by US-based employers fell 25% in April to 22,913, the fewest since June 2000. Planned layoffs so far this year are down 84% from the same period in 2020.
According to a Reuters survey of economists, nonfarm payrolls likely increased by 978,000 jobs in April after rising by 916,000 in March. That would leave employment about 7.5-million jobs below its peak in February 2020.
Estimates range from as low as 656,000 to as high as 2.1-million jobs. The department will publish April's employment report on Friday.
Jobless claims have dropped from a record 6.149-million in early April 2020. They are, however, well above the 200,000-250,000 range that is viewed as consistent with a healthy labour market.
Part of the elevation has been blamed on fraud as well as the enhancement of the unemployment benefits programmes, including a weekly $300 subsidy, which could be encouraging some people to attempt to file a claim for assistance, though not every application is approved.
Including a government-funded programme for the self-employed, gig workers and others who do not qualify for the regular state programmes, 605,884 people filed for claims last week. These benefits and the weekly subsidy end in early September. They have been blamed for worker shortages across many industries.
“The government is paying more to be on the unemployment rolls than the private sector is paying to work at their businesses,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania. “The choice is clear, at least until the enhanced benefits run out.”
The claims report also showed the number of people receiving benefits after an initial week of aid increased 37,000 to 3.690-million in the week ended April 24. About 5-million people were on government-funded extended benefits during the week ended April 17. Another 453,653 were on a state programme for those who have exhausted their initial six months of aid.
There were 16.2-million people receiving benefits under all programmes in mid-April. With economic activity strengthening, worker productivity is rebounding, which should help to protect profits as companies face higher input costs caused by the robust demand and a shortage of materials and labour.
In another report on Thursday, the department said nonfarm productivity, which measures hourly output per worker, rebounded at a 5.4% annualised rate last quarter. Productivity contracted at a 3.8% rate in the final three months of 2020, the sharpest since the fourth quarter of 1990.
“We expect productivity to strengthen in coming quarters and remain well supported as the economy experiences a mini-boom in activity and the labour market lags the overall economic recovery,” said Kathy Bostjancic, chief US financial economist at Oxford Economics in New York.
“Stronger productivity gains should buffer companies' bottom lines against rising input costs and further boost profit growth this year amid an expected surge in companies' sales.”
GDP is expected to rise above its pre-pandemic level this quarter, while most economists expect a full recovery in employment in the second half of 2022.
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