© Reuters. FILE PHOTO: People stand in line outside a newly opened career center for personal appointments in Louisville, USA, April 15, 2021. REUTERS / Amira Karaoud / File Photo
By Lucia Mutikani
WASHINGTON (Reuters) – The number of Americans filing new unemployment benefits has fallen to their lowest level since 1969 last week, pointing to sustained strength in the economy as a year of shortages and an endless pandemic.
The jump in claims reported by the Ministry of Labor on Wednesday was exaggerated by the model the government uses to remove seasonal fluctuations from the data. Nevertheless, the recovery in the labor market is gaining momentum, with the number of people on the unemployment list hitting the lowest level since mid-March 2020, when the economy was in the grip of the first wave of COVID-19 infections.
“There may be some seasonal adjustment issues, but the handwriting is on the wall, and all the anecdotal reports on how companies can not find the help they need are true,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “The economy will end the year with a bang.”
The first claims for state unemployment benefits fell by 71,000 to seasonally adjusted 199,000 for the week ending November 20, the lowest level since mid-November 1969.
Economists polled by Reuters had predicted 260,000 applications for the past week. The decline pushed applications below their pre-pandemic average of around 220,000.
Unadjusted claims rose 18,187 to 258,622 last week amid a rise in Virginia that offset falls in California, Kentucky and Missouri.
The report was released early due to the Thanksgiving holiday on Thursday. The data may become noisy during the holiday season. Demands have fallen from a record high of 6.149 million in early April 2020 and are now in a zone considered to be in line with a healthy labor market, although an acute labor shortage caused by the pandemic is hindering faster job growth.
But there is hope for an increase in the work pool. The number of people continuing to receive benefits after a first week of assistance fell 60,000 to 2.049 million in the week ending November 13, the injury report showed. It was the lowest level since mid-March 2020.
Unemployment benefit applications have reached a low of 5 decades: https://graphics.reuters.com/USA-ECONOMY/zjvqkwbklvx/chart_eikon.jpg
Employment growth has averaged 582,000 jobs per month this year. There were 10.4 million job openings at the end of September. The workforce has dropped 3 million people from its pre-pandemic level, even as generous federal government-funded benefits have expired, schools have reopened for personal learning, and companies are raising wages.
The drop in claims is in line with data on retail and manufacturing production, which has indicated that the economy was regaining momentum in the fourth quarter after hitting a speed bump in the period July-September when coronavirus cases flared up over the summer, and deficiency became more prevalent.
A separate report from the Ministry of Commerce on Wednesday confirmed the sharp slowdown in growth in the third quarter. Gross domestic product grew at an annual rate of 2.1%, the government said in its second estimate of GDP growth for the period. It was still the slowest growth rate in more than a year, but was revised slightly up from the 2.0% expansion rate reported in October.
Economists had expected third-quarter GDP growth to rise to a rate of 2.2%. The economy grew by 6.7% in the second quarter. The small upward adjustment reflected a more moderate pace in inventory extraction than originally estimated, which offset a large decline in consumer consumption.
But that’s all in hindsight. A third report from the Ministry of Commerce showed that orders for non-defense capital goods excluding aircraft, a closely monitored proxy for business spending, rose 0.6% last month. Economists had predicted an increase in orders for core capital goods by 0.5 per cent.
Part of the increase last month probably reflected higher prices due to global shortages of goods. Corporate equipment costs fell in the third quarter after four consecutive quarters of double-digit growth.
It was weighed down by a lack of motor vehicles. A global shortage of semiconductors underpins the production of motor vehicles. Consumer spending also appears to have regained momentum in October, with retail sales rising last month as Americans started their holiday shopping early to avoid shortages and pay even more for scarce goods.