The weekly jobless claims increased this past week slightly but remained near the pandemic lows. There is an increased demand for employees that is keeping the overall weekly jobless claims low. The initial weekly jobless claims are considered as a proxy for layoffs. They went to an adjusted mark of 351,000 against the prediction of experts of the level of 320,000. This was an increase of 16,000. The four-week moving average for initial weekly jobless claims takes out the weekly volatility. It decreased a little and stayed at its lowest level since the coronavirus crisis began the previous year. This week's increase can be attributed to the higher weekly jobless claims filed in Virginia and California.
The weekly jobless claims have been decreasing steadily since companies are retaining employees despite the Delta variant of the coronavirus since mid-July. This month, disruptions from Hurricane Ida have led to an increase in the weekly jobless claims. Experts say that the present speed of labor market recovery and job growth will take the weekly jobless claims to the pre-pandemic mark sometime in the middle of the next year. According to Nancy Vanden Houten, lead economist at Oxford Economics, "We expect that the downward trend that we have seen for a while will resume. The big picture is that we expect the labor market recovery will continue. Layoffs are down because employers, if anything, we are not finding the workers they need, so they will be more reluctant to lay people off. Individuals have been a bit slower to return to the job market than expected, and that is reflected in continued claims remaining elevated."
The number of US citizens filing weekly jobless claims for unemployment benefits increased quite unexpectedly this week. The states seen responsible for it are Virginia and California. But the overall trend of falling weekly jobless claims remains more or less steady with the recovering job market. Many economists were perplexed by the second consecutive increase in the weekly jobless claims reported by the Labor Department. Several of them said that the wildfires in California are responsible for the increases. Some others said that Hurricane Ida had caused the increases in the weekly jobless claims. The hurricane severely disrupted the nation's offshore energy production a few months ago. Very few think that the onset of the Delta variant of the coronavirus is responsible for the sudden increase.
The weekly jobless claims in Virginia showed a rise of 12,879, while figures in California increased by 24,221. Growth was also seen in Kentucky, Ohio, and Oregon. The claims in the state of Louisiana decreased and have maintained their pre-hurricane trend in the past weeks. According to Daniel Silver, an expert at JPMorgan, "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. But even including any storm-related claims, the recent move up in filings has not looked particularly severe so far, and we do not think the labor market recovery has been derailed at this point."
The weekly jobless claims have decreased from their record level in early April 2020. But they remained above the mark of 250,000 that is seen to be in line with robust labor market conditions. The Federal Reserve was upbeat on the economy. They said that they are looking to decrease the monthly bond purchases soon. They also indicated that the interest rate increase might be sooner than expected. According to Nancy Vanden Houten, "perhaps fires in California and the lingering impact of Ida in Virginia contributed to those increases, but we do not know for certain. 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."
A survey from the data company IHS Markit showed that business activity increased at its slowest speed in a year this month. This is amidst the scenario where firms are struggling with shortages of labor and raw materials. But the slowdown is being seen as temporary. The leading economic index of the Conference Board grew by 0.9% in August after the increase of 0.8% in July. According to the Conference Board, the trend found in the index is in line with steady economic growth for the rest of the year. The stocks on Wall Street were trading a little higher. The dollar decreased against a basket of currencies. The US Treasury prices decreased.
According to Gus Faucher, chief economist at PNC Financial Services Group, "what we are seeing is a labor market that continues to get better, but we are still dealing with high levels of unemployment. It may not be showing up in claims, but we saw softness in the August jobs report that I think was tied to the Delta variant. That being said, the areas most exposed to the surge in cases are the areas least likely to put restrictions on economic activity. So, I think the economic fallout has been limited."
The weekly jobless claims data covers the period when the federal government surveyed organizations for the nonfarm payrolls segment of this month's employment report. The weekly jobless claims were only a little changed between the August and September payrolls survey periods. The job growth declined in August. The payrolls had their lowest growth in the past half-year. This was because hiring decreased in the high-contact hospitality and leisure segments. The weekly jobless claims report also showed that the number of citizens continuing to get benefits after the initial week of aid grew by 131,000 to 2.845 million. This was for the week ended September 11. The next week's data on continuing jobless claims will show how hiring fared this month. "For the labor market, recovery is ongoing, but supply shortages remain a headwind," said Rubeela Farooqi, chief U.S. economist at High-Frequency Economics in White Plains, New York.
There are some factors due to the coronavirus that is leading to worker shortages. This impacts hiring by organizations. Federal Reserve Chairman Jerome Powell told reporters that he expected more growth in employment as these factors were reduced. These include fears of getting infected with the virus and the absence of affordable childcare. At the end of July, there were nearly eleven million job openings. The Federal Reserve has said that the unemployment rate is expected to be at 4.8% this year. This represents an increase from the 4.5% rate that is projected in June. The unemployment rate was 5.2% in August. There is some optimism that the labor crunch will reduce after the government-funded unemployment benefits earlier this month. The opposition and organizations had blamed the benefits for encouraging people to stay at home instead of going to work.
Nearly 11,250 million citizens were getting unemployment benefits under all the government programs during the start of September. Nearly eight million people have lost out on the benefits extended by the government during the pandemic. But this is not looking to increase the labor pool significantly. A few months ago, early termination of such benefits by more than 24 Republican-led states did not cause a great increase in hiring in those locations. The Delta variant could also cause some hesitation among those people to return to the workforce.