The number of citizens filing weekly jobless claims for unemployment aid increased surprisingly in the previous week. The initial claims for the aid grew by 23,000 to an adjusted figure of 248,000 for the week ended February 12. Experts had predicted that the numbers would be around 220,000 for the present week. The number of citizens getting continuing aid was about 1.5 million for the week ended February 5. But the overall claims are quite below the high mark of nearly three hundred thousand present in the middle of the previous month. Nearly five hundred thousand jobs were created during the previous month. The weekly jobless claims were increased due to some huge jumps in Kentucky, Ohio, and Missouri. But they were somewhat offset by the market decreases in Wisconsin, New Jersey, and Pennsylvania. There were nearly eleven million job openings at the end of the previous year. The claims have decreased from the record highs of more than six million that were achieved a couple of years ago at the pandemic's start.
But the jobless claims have remained below the mark attained before the pandemic. This is because the conditions in the labor market have still not improved to their previous levels a couple of years ago. The weekly jobless claims released by the Labor Department had a growth for the first time this month. But this has not changed experts' expectations for a whole month of robust employment growth as a whole. There has been a great shortage of workers in the economy. This has seen several firms increasing their wages and giving other incentives to retain their existing workforce and get new labor from the market. The experts have said that the growth in jobless claims has happened due to the extreme weather in some portions of the nation and the volatility in the week-to-week data. The previous week's data covered the time during which the Federal Government surveyed the organizations of the nation for the nonfarm payrolls for the employment report of this month.
The weekly jobless claims have decreased since going to a high of more than two months in the middle of the previous month. This is because Coronavirus cases were increasing rapidly across the entire nation because of the Omicron variant. This month, the infections have seen a remarkable decline. The shares on Wall Street saw a decrease due to the increasing tension between Russia and the West over the Ukraine conflict. The dollar saw an increase against a basket of currencies. Senior economist at JPMorgan Daniel Silver said, "Given the regular noise in the data and the range of factors that can impact filings, we don't think the recent jump in initial claims filings is particularly worrisome at this point. Overall, we think that the labor market remains tight."
Managing Director at Wells Fargo Corporate and Investment Banking Sam Bullard said, "At the January meeting, the FOMC strongly signaled conditions were ripe for rate hikes starting in March by stressing the risks of persistent, above-target inflation and the progress made in the labor market. For now, we continue to think the most likely outcome is that the Fed will act in a 'measured' way, with 25 bps hikes." Senior economist at Citigroup Veronica Clark added, "While some level of labor market churn should continue in the near term, we would not be surprised to see claims fall even further below pre-pandemic levels in the coming months. This would reflect an overall low level of layoffs as businesses struggle to reach desired levels of employment in the first place."
Housing Sees a Decline
A recent survey from the Philadelphia Federal Reserve showed that the employment at factories in the mid-Atlantic area increased by a wide margin this month. The manufacturers have also increased the working hours for their employees. But the activity in the factories that cover the areas of Delaware, southern New Jersey, and eastern Pennsylvania grew by an average margin because of the ongoing issues in the supply chain. Another report from the Commerce Department stated that the housing starts have declined. The supply of the previously owned houses in the country is at a record low right now. But home builders are getting stiff challenges to form the high costs of the various inputs required in the industry. The cost of softwood lumber utilized for framing also increased significantly in the previous week.
The National Association of Homebuilders said that the building material production had bottlenecks causing delays in projects. They said several builders are waiting for a long period to get appliances, countertops, garage doors, and cabinets. The constraints in supply were underlined by an increase in the backlog of homes that have been approved for construction but have not yet been started. The growth in the mortgage rates can also lead to slowing demand for the housing sector, more so among first-time home buyers. Homebuilding also showed a decrease due to the persistently cold temperatures present during this month. The National Centers for Environmental Information said that the temperatures were below the usual in the Tennessee Valley and the Midwest in the previous month.
Senior economic advisor at Brean Capital Conrad DeQuadros said, "There are no signs here of a change in labor market trends." Citigroup senior economist Isfar Munir said, "Rising mortgage rates pose a significant risk to housing demand, but it's unclear what type of lag would exist for this impact to appear in the construction data. New homes can be sold before they are started. Last-bid attempts to buy homes before mortgage rates increase further could boost new home sales before the Fed actually begins hiking. This would be a positive tailwind for housing starts, at least for a few months."
Inflation is Still Strong
The economy's inflation remains strong because of the restricted supply chains and the narrow labor market. The Federal Reserve held a meeting last month. According to the meeting minutes, several central bank officials stated that they saw the labor market conditions in line with what is expected to be the maximum employment mark in the economy. The Federal Reserve will start increasing the interest rates starting next month to control the growing inflation. Experts have said that there could be multiple hikes in this year alone. The labor market data is a vital sign of the economy's overall health. But the ongoing decades-high inflation in the country has gained prominence over the state of the labor market for policymakers. Consumer costs are increasing at the highest rate in more than forty years.
So, the Federal Open Market Committee members have now started to shift their focus to bringing down inflation rather than boosting the lagging labor market. This is because the labor market has shown some signs of recovery and is bringing several citizens back to the workplaces and giving many chances for workers to switch their jobs. Chief economist at Pantheon Macroeconomics Ian Shepherdson said, "The Omicron wave triggered a brief but startling spike in initial jobless claims, but payroll growth slowed only marginally in January, and the initial data for February from Homebase point to a rebound. At the same time, we are becoming increasingly convinced that the long-awaited rebound in labor participation is now underway, especially among women who left the labor force in disproportionate numbers when schools and child care were closed.”
“Participation is unlikely to return to its pre-COVID level, thanks in part to early retirement among older people, who have seen big increases in the value of their homes and other assets. Still, we hope it will rise far enough to ease the pressure on wage growth."
Experts believe that the sudden increase in the weekly jobless claims this week is just a small blip in another good month for job growth. But the inflation in the economy is still looming large. The Federal Reserve will start increasing the interest rates from next month to bring it down. Experts believe that there may be more than six hikes this year.