US weekly jobless claims fall; first quarter GDP unrevised at 6.4pc

WASHINGTON: Fewer Americans filed new claims for unemployment benefits last week as the labor market recovery from the COVID-19 pandemic gains traction amid a reopening economy, but a dearth of willing workers could hinder faster job growth in the near term.

Initial claims for state unemployment benefits fell 7,000 a seasonally adjusted 411,000 for the week ended June 19, the Labor Department said on Thursday. Applications increased in the prior week for the first time since late April, with economists attributing the rise to volatility in the aftermath of the May 31 Memorial Day holiday.

"Imprecise seasonal factors around Memorial Day holiday weekend likely contributed to the uptick in initial claims, so the rise should prove temporary," economists at Bank of America Securities in New York wrote in a note.

Economists polled by Reuters had forecast 380,000 applications for the latest week. Claims have dropped from a record 6.149 million in early April 2020. They, however, remain above the 200,000-250,000 range that is viewed as consistent with a healthy labor market.

At least 150 million Americans have been fully vaccinated against the coronavirus, allowing the economy to begin reopening. But millions of workers remain at home, frustrating employers who are desperately seeking help to meet surging demand as people leave their homes after being cooped up for more than a year.

There are a record 9.8 million job openings. A shortage of childcare facilities is keeping some parents, mostly women, outside the labor force. Generous government-funded unemployment benefits, including a $300 weekly check, have also been blamed, as well as a hesitancy to return to work out of fear of contracting the virus. Pandemic-related retirements and transitions into new careers are also factors.

Four states, including Iowa and Alaska, either terminated all federal government-funded benefits or just the $300 supplement on June 12. They were joined last Saturday by eight other states, including Alabama and West Virginia.

Thirteen other states with Republican governors, including Texas and Florida, will end these benefits for residents between June 26 and July 10. Louisiana is ending the weekly supplementary check on July 31, the only state with a Democratic governor to terminate federal benefits. For the rest of the country, they will lapse on Sept. 6.

NO JOB SEARCH SURGE

The end of benefits in the 12 states has not led to a surge in job searches, according to data from Indeed Hiring Lab.

"The share of national job search activity in these states, measured by clicks on job postings, is below the late April baseline," said Jed Kolko, chief economist at the Indeed Hiring Lab. "If overly generous federal unemployment insurance benefits were holding back job seekers, then we would expect search activity to increase, relative to the national trend, in states where those benefits have ended."

A JPMorgan analysis of other job data that combines mobility, small business revenues and consumer card spending also reached similar conclusions.

"It is possible that it is still too early to see much effect of the benefit cancellations on these spending and activity measures," said Daniel Silver, an economist at JPMorgan in New York. "We also have yet to see much change in the number of workers collecting UI benefits relative to recent trends, suggesting there has been little change in job-finding so far."

Federal Reserve Chair Jerome Powell told lawmakers on Tuesday that he believed the economy would see strong job creation in the fall. In addition to the brightening public health situation, trillions of dollars in pandemic relief from the government are also underpinning the economy.

A separate report from the Commerce Department on Thursday confirmed economic growth accelerated in the first quarter, thanks to the massive fiscal stimulus.

Gross domestic product increased at a 6.4% annualized rate last quarter, the government said in its third estimate of growth for the first three months of the year. That was unrevised from the estimate published last month. The economy grew at a 4.3% rate in the fourth quarter.

Growth this quarter is forecast to be around a 10% rate.