If claims remain at 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.
According to data released by the US Department of Labor on Wednesday, as of the week of November 20, the number of initial jobless claims for regular state plans decreased by 71,000, to 199,000 after seasonal adjustment. The median estimate of 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 due to the difficulty of the labor market to recover, seasonal factors predict that the increase in unadjusted applications will be small compared with 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 on 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 stand by, 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.
According to the October employment report, the number of employed persons increased by 531,000 after a substantial upgrade of the first two months. Economists have called for an additional 500,000 increase in November, which will be announced on December 3.