The number of Americans filing new claims for unemployment benefits rose unexpectedly last week, but the labour market is regaining its footing as an acceleration in the pace of vaccinations leads to more businesses reopening.
The improving health situation, combined with extremely accommodative monetary and fiscal policy have set the economy on course for its fastest growth pace this year since 1984. Other data on Thursday showed factory activity in the mid-Atlantic region raced to its highest level in nearly 50 years in March.
Initial claims for state unemployment benefits increased 45,000 to a seasonally adjusted 770,000 for the week ended March 13, from 725,000 in the prior week, the Labour Department said. Data for the prior week were revised to show 13,000 more applications received than previously reported.
Economists polled by Reuters had forecast 700,000 applications in the latest week. Unemployment claims have dropped from a record 6.867 million in March, 2020, but are still above their 665,000 peak during the 2007-09 Great Recession. In a healthy labour market, claims are normally in a 200,000 to 250,000 range.
Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state programs, one million people filed claims last week.
Claims have been distorted by backlogs and fraudulent applications. The four-week moving average of initial claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 16,000 to 746,250 last week, a four-month low.
“It is virtually impossible to extract signal from noise in the jobless claims data in the current environment with the claims data seemingly plagued by fraud,” said Conrad DeQuadros, senior economic adviser at Brean Capital in New York.
The United States had administered 113,037,627 doses of COVID-19 vaccines in the country as of Wednesday morning and distributed 147,590,615 doses, according to the U.S. Centers for Disease Control and Prevention. The faster pace of inoculations should allow for broader economic re-engagement, even as the rate of decline in new coronavirus infections has levelled off.
In a separate report on Thursday, the Philadelphia Federal Reserve said its business-conditions index surged to a reading of 51.8 this month. That was the highest since at least 1973 and followed a reading of 23.1 in February. Measures of new orders and shipments at factories in the region that covers eastern Pennsylvania, southern New Jersey and Delaware also soared.
A gauge of factory employment climbed to its highest level since June, 2018, and manufacturers increased hours for workers. The survey, however, likely exaggerates the manufacturing sector’s health.
A global semiconductor shortage is undercutting production of motor vehicles, and bottlenecks in the supply chain remain a constraint for other manufacturing industries.
Still, strong manufacturing aligns with expectations that economic growth this year could be as high as 7 per cent. That would be the fastest growth since 1984 and would follow a 3.5-per-cent contraction last year, the worst performance in 74 years.
The Federal Reserve is projecting robust growth and higher inflation this year. The U.S. central bank, however, repeated its pledge to keep its benchmark overnight interest rate near zero for years to come.
Despite the elevation in claims, the labour market recovery is seen gaining traction, spurred by President Joe Biden’s US$1.9-trillion rescue plan, which is sending fresh aid to businesses and households. Progress sputtered between November and January amid a resurgence in COVID-19 cases and expiration of pandemic relief funds from the government.
Last week’s claims data covered the period during which the government surveyed business establishments for the non-farm payrolls component of March’s employment report. Claims, however, have been too noisy, limiting their usefulness in predicting job growth.
The economy added 379,000 jobs in February. Employment remains 9.5 million jobs below its peak before the pandemic barrelled through the United States in March, 2020.
The claims report also showed the number of people receiving benefits after an initial week of aid declined 18,000 to 4.124 million during the week ended March 6. The decrease reflected people finding work as well as exhausting their eligibility for benefits, limited to 26 weeks in most states.
About 4.815 million people were on the government-funded extended benefits program during the week ended Feb. 27, down 640,732 from the prior week. The number of people on unemployment benefits under all programs during that period fell 1.9 million to 18.2 million.
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