In the previous week, the number of citizens filing weekly jobless claims for unemployment aid increased to its highest since October. This was probably because there has been a winter wave of coronavirus infections that disrupted the business activity. This could have been the major factor in hindering job growth this month. The Labor Department reported another consecutive increase in jobless claims. It was also influenced by other unfavorable seasonal factors present after the holidays. But the coronavirus infections, driven by the new Omicron wave, are decreasing. The seasonal factors, the model utilized by the government to iron out the seasonal fluctuations in the overall data, are also normalizing. This shows that the present increase in the applications is a tiny blip.
The initial weekly jobless claims increased by more than fifty thousand to an adjusted figure of 286,000 for the week ended January 15. This was the highest mark since July of the previous year. The experts polled had said that there would be 220,000 weekly jobless claims for this week. In the previous week, the unadjusted claims decreased by more than eighty thousand to 337,417. But the decrease was smaller than the one forecasted by the seasonal factors. The weekly jobless claims increased by six thousand in California but decreased by fourteen thousand in New York. According to an analysis of the official data, the country is reporting an average of more than seven hundred thousand new coronavirus infections daily.
The Household Pulse Survey was released by the Census Bureau this week. It showed that nearly nine million citizens reported not being at work because of pandemic-related reasons during the initial days of this month. This was a major increase from the mark of three million present at the same time in the previous month. The Small Business Pulse Survey was also released by the bureau. It showed an increase in the organizations reporting big negative impacts from the pandemic. It was led by the food and accommodation services business. There were big increases also in the recreation, entertainment, arts, and education sectors. The setback in the labor market will not stop the Federal Reserve from increasing the interest rates a few months from now to tackle the high inflation.
The weekly jobless claims have decreased from a record high of more than six million in early April a couple of years ago. Employers are looking for workers. There were more than ten million job openings a couple of months ago. The unemployment rate is at its lowest point in nearly two years at four percent. This signifies that the labor market is close to its maximum employment abilities. The stocks on Wall Street were trading higher. The dollar also rose against a basket of currencies. The US Treasury yields also decreased. Ryan Sweet, a senior economist at Moody's Analytics, said, "The Omicron variant of COVID-19 is hurting the US labor market, but the good news is that this will be temporary." John Lynch, the chief investment officer in Comerica Wealth Management, said, "The underlying strength in the labor market suggests this is a temporary blip due to Omicron. We look for job growth to continue to firm as global cyclical recovery persists."
Is The Jump in Weekly Jobless Claims a Bad Omen?
Several experts are worried that the increase in the weekly jobless claims, following a decrease in retail sales in the previous month and the manufacturing production, could be a sign that a rapid slowdown in the economic activity may happen that has not been anticipated yet. Manufacturing looks to be picking up again. But higher prices and shortages remain a major concern for the sector. The Federal Reserve of Philadelphia said that the business activity index increased to a mark of more than twenty in this month from fifteen in December. Any level above zero indicates the expansion in the manufacturing sector of the region, which covers Delaware, southern New Jersey, and Pennsylvania.
The news on the housing market was not very encouraging either. Another report released by the National Association of Realtors showed that the present home sales decreased by 4.5% to a seasonally adjusted rate of six million units in the previous month. This is because the higher costs of the record low inventory are shutting out some of the first-time buyers. Experts expect the demand for housing to remain robust even as the mortgage rates increase swiftly. The worker shortages are leading to an increase in wages. Households are sitting on the savings accumulated during the whole pandemic. The weekly jobless claims data covered when the Federal Government surveyed organizations for the nonfarm payrolls component of the employment report in January.
Bankrate senior economic analyst Mark Hamrick said, "The surge in COVID cases has created new headwinds for the economy even as tailwinds, including the federal government's fiscal boosts, are waning. The dangerous combination of supply chain constraints and the shortage, or lack of availability, of workers amid the Omicron surge is weighing on the nation's economic recovery." Christopher Rupkey said, "The higher layoffs are a cautionary tale for the economy where despite inflation pressures, the Fed will have to proceed with their interest rate hikes at a measured pace. The economy may be slowing down more than previously believed."
Reserve Bank is Going to Increase the Interest Rates Soon
Federal Reserve Chairman Jerome Powell has said a strong recovery in the labor market from the levels were achieved during the pandemic. He also indicated that the Reserve bank would soon start a round of interest rates revision to cool the runaway inflation caused, in part, by the increase in wages. He said that the job openings that now outnumber the unemployed individuals are the reasons the labor market is robust at this point in time. The unemployment rate is currently four percent. This is not far from the record west in February, a couple of years ago before the pandemic took hold. The labor force participation is still below the levels achieved before the pandemic. But several experts now feel that it shows the structural and demographic changes rather than the pandemic's effects.
Powell said, "I think there's quite a bit of room to raise interest rates without threatening the labor market. The labor market has made remarkable progress." Mark Hamrick, the senior economic analyst at Bankrate, said, "Job creation, or restoration, slowed in November and December, averaging 224,000 jobs added to payrolls compared to 537,000 a month for the full year. It is hard to make a case for a huge acceleration in hiring this month." David Berson, the chief economist at Nationwide, said, "Unless job and income growth slows sharply, owner-occupied housing demand is likely to remain solid, keeping upward pressure on house prices." Van Hesser, the chief strategist at Kroll Bond Rating Agency, said, "The pandemic continues to displace workers from the labor force. We need the labor force to grow to sustain healthy economic growth."
The weekly jobless claims have increased in the past couple of weeks after settling near the range of two hundred thousand. The experts are predicting that the highly transmissible Omicron wave of the coronavirus was assisting in keeping the workers away from their jobs. The four-week moving average was 246,000. This was a growth of 14,000 from the previous mark. Next week will see the first report on the monthly job growth for this year. The Federal Reserve will also increase the interest rates in a couple of months. Experts and others have cautioned that the swift growth of jobs in the previous year may not happen this time around.