The number of United States workers filing new claims for unemployment benefits unexpectedly rose last week, boosted by surges in California and Virginia, but the underlying trend remained consistent with a steadily recovering labour market.
The second straight weekly increase in jobless claims reported by the US Department of Labor on Thursday puzzled economists. Some pointed a finger at the wildfires in California, while others blamed Hurricane Ida, which devastated US offshore energy production in late August. There was little conviction that ongoing COVID-19 infections, driven by the highly contagious Delta variant of the coronavirus, were a factor.
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“Some, but not all, of this recent pickup looks related to Hurricane Ida, as filings 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 claims, the recent move up in filings has not looked particularly severe so far, and we don’t think the labour market recovery has been derailed at this point.”
Initial claims for state unemployment benefits increased 16,000 to a seasonally adjusted 351,000 for the week ended September 18. Economists polled by Reuters had forecast 320,000 applications for the latest week.
Unadjusted claims in the state of California jumped 24,221 while Virginia reported a rise 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 the lingering impact of Ida in Virginia contributed to those increases, but we don’t know for certain,” said Nancy Vanden Houten, lead UD economist at Oxford Economics in New York. “We expect claims to return to their downward path in the weeks ahead, but the data will be more uneven as claims get closer to pre-pandemic levels.”
The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 750 to 335,750 last week. That was the lowest level since mid-March 2020, when mandatory closures of non-essential businesses were enforced when the nation was slammed by the first wave of coronavirus cases.
Claims have dropped from a record 6.149 million in early April 2020, but still remain above the 200,000-250,000 range that is viewed as consistent with healthy labour market conditions.
The US Federal Reserve on Wednesday struck an upbeat note on the economy, paving the way to reduce its monthly bond purchases “soon” and signalling that interest rate increases may follow more quickly than expected.
A survey on Thursday from data firm IHS Markit showed business activity grew at its slowest pace in a year in September as companies struggled with ongoing shortages of raw materials and labour.
But the slowdown is likely temporary. A third report from the Conference Board showed its Leading Economic Index (LEI, the Conference Board’s gauge of future US economic activity) increased 0.9 percent in August after rising 0.8 percent in July. The Conference Board said, “The trend in the LEI is consistent with robust economic growth in the reminder of the year.”
Stocks on Wall Street were trading higher. The dollar slipped against a basket of currencies. US Treasury prices were lower.
Last week’s claims data covered the period during which the government surveyed employers for the nonfarm payrolls portion of September’s employment report. Claims were little changed between the August and September payrolls survey periods.
Job growth slowed in August, with payrolls posting their smallest gain in seven months as hiring stalled in the high-contact leisure and hospitality sector.
The claims report also showed the number of people continuing to receive benefits after an initial week of aid increased 131,000 to 2.845 million in the week ended September 11. Data next week on the so-called continuing claims will offer more clues on how hiring fared in September.
Pandemic-related factors are causing worker shortages, which are constraining hiring. Federal Reserve Chair Jerome Powell told reporters on Wednesday that he anticipated “more rapid gains in employment” as these factors, which include lack of affordable childcare and fears of contracting the coronavirus, diminish.
There were a record 10.9 million job openings at the end of July. The Fed projected the unemployment rate to be at 4.8 percent this year. That was up from the 4.5 percent rate that the Fed, which is the US central bank, projected in June. The jobless rate was 5.2 percent in August.
There is cautious optimism that the labour crunch will ease following the expiration of government-funded unemployment benefits early this month, which had been blamed by businesses and Republicans for encouraging the unemployed to stay at home.
At least 11.25 million people were receiving benefits under all unemployment programmes during the week ended September 4. According to Andrew Stettner, senior fellow at The Century Foundation, more than 8 million people have lost all their pandemic benefits.
It is, however, unlikely that this would boost the labour pool. An early termination of expanded benefits by about 25 states led by Republican governors over the summer did not lead to a surge in hiring in those areas, and the Delta variant could cause reluctance among some people to return to work.
“For the labour market, recovery is ongoing, but supply shortages remain a headwind,” said Rubeela Farooqi, chief US economist at High Frequency Economics in White Plains, New York.
There are signs that holiday hiring may look different this year as well. Retail firms typically staff up to deal with the rush of the holiday season, which begins the day after the Thanksgiving holiday in November, includes Christmas in late December, and usually concludes in early January.
Target Corp said on Thursday that it plans to hire 100,000 seasonal workers this year, about 30,000 fewer than last year, to prepare for the holiday season.
Instead of hiring more seasonal workers, the company said it will offer more work hours to its more than 350,000 existing employees during the busy period, resulting in about $75m more into their paycheques.
Rival retailer Walmart Inc has said it plans to bring in 20,000 workers at its supply chain division ahead of the holiday season.