If claims are sustained at pre-pandemic levels, this would increase the likelihood of the Federal Reserve tapering its bond purchases and raising interest rates.
Applications for US state unemployment benefits fell last week to levels not seen since 1969, which if continued would be the next milestone in the labor market’s uneven recovery.
Labor Department data showed Wednesday that initial unemployment claims in regular state programs fell from 71,000 to a seasonally adjusted 199,000 in the week ending Nov. 20. The average estimate in a Bloomberg survey of economists called for 260,000 applications.
However, the larger-than-expected decline can be explained by how the government adjusts the raw data for seasonal fluctuations. Lou Crandall, chief economist at Wrightson ICAP, pointed out in a recent note that seasonal factors were anticipating a smaller increase in unadjusted claims compared to the same time last year as the labor market struggled to recover.
“This is purely a seasonal factor distortion. Much of it will reverse next week,” Crandall said after the release.
Before the seasonal adjustment, initial jobless claims rose by nearly 18,000 last week.
US equity-index futures maintained losses, and Treasuries fell after a separate report on jobless data and durable-goods orders showed a decline over the previous month. The Bloomberg Dollar Index rose.
If claims are indeed sustained at pre-pandemic levels, it will increase the likelihood that Federal Reserve officials will accelerate their tapering of bond purchases and consider raising interest rates soon after buying ends in 2022 . The data follows reports showing the sharpest inflation. Three decades and job growth in October.
Claims stood at 216,000 at the end of February 2020, leading to the onset of COVID-19 in the US, which pushed applications to a peak of 6.1 million in early April 2020. They have declined since the economy reopened more widely. Americans returned to work. Also, federal pandemic unemployment benefits in all states expire by September 6.
Yet, millions of Americans still choose to sit on the sidelines, frustrated employers desperate to fill nearly record positions. Child care continues to be a serious issue for working parents, especially as COVID cases are on the rise again in many states and individual learning is hampered.
The October jobs report showed payrolls increased by 531,000 after a massive revision over the past two months. Economists are calling for another half a million to be added in November, which will be reported on December 3.