US sees surprise rise in weekly jobless claims, proxy for layoffs

The jobs market recovery in the United States hit a speed bump as the number of Americans filing for unemployment benefits with states ticked up unexpectedly last week – the first such rise since late April.

Weekly jobless claims, a proxy for layoffs, hit 412,000 last week – 37,000 more than the previous week’s revised level of 375,000, the US Bureau of Labor Statistics said on Thursday.

Last week’s drift upward broke a six-week streak of falling weekly jobless claims numbers and came as a surprise to many economists who were looking for the downward trend to continue.

But weekly data can be noisy and does not necessarily indicate that a reversal in the labour market rebound is taking hold.

Indeed, the four-week moving average for weekly jobless claims, which helps eliminate some of the data noise, continued to drift downward to 395,000 – a fall of 8,000 from the previous week’s revised average.

The number of people currently collecting unemployment benefits from states – aka “continuing claims” – also fell to 14,828,950 for the week ending May 29 – more than half a million fewer than the previous week.

While weekly jobless claims are still nearly double pre-pandemic readings, they have fallen sharply from this time last year, when they were averaging north of 1.4 million.

A big problem sweeping the nation’s labour market right now is the number of open positions businesses are struggling to fill.

Job openings in the US hit a record high of 9.3 million in April as millions of US consumers come out of pandemic hibernation and businesses ramp up operations to cater to the great unleashing of pent-up demand.

The struggle to hire is suppressing job creation -a phenomenon seen in the latest monthly employment report that showed the US economy added 559,000 jobs in May.

The economy still has 7.6 million fewer jobs than it did before lockdowns swept the nation last year – and that deficit does not even account for growth in the labour force and the economy since then.

Economists are divided over what is causing the disconnect between the number of jobless workers and employers who cannot find enough people to fill job openings.

Some believe the $300 federal-weekly top to state unemployment benefits is acting as a disincentive for the jobless to find new positions. Others point to a talent bottleneck as businesses reopen or ramp up at once. A lack of childcare options due to ongoing daycare centre closures and remote schooling, as well as fear of contracting COVID-19 could also be keeping jobless workers from pounding the pavements in search of work.

No matter the cause, jobless Americans can continue to count on the US Federal Reserve to keep monetary policy loose in order to support the continued recovery in the nation’s labour market.

On Wednesday, Fed policymakers, led by chief Jerome Powell, reiterated that they are willing to tolerate inflation trending above their target 2 percent rate for a prolonged period if that is what it takes to get as many Americans back to work as possible. But the Fed did bring forward its timeline for possibly raising interest rates – which cools job creation – to 2023 from 2024.