WASHINGTON: The number of Americans filing new claims for unemployment benefits dropped more than expected last week as layoffs subsided, with companies desperate for workers to meet surging demand unleashed by a rapidly reopening economy.
The economy, which in the first quarter notched its second-fastest growth pace since the third quarter of 2003, is gaining speed, with other data on Thursday showing business spending on equipment accelerated in April. Activity is being boosted by the Covid-19 pandemic’s easing grip and nearly $6 trillion in relief provided by the government over the past year.
“The economy is off and running,” said Scott Hoyt, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Going forward growth will be supported by the pent-up savings that households have amassed during the pandemic.”
Initial claims for state unemployment benefits fell 38,000 to a seasonally adjusted 406,000 for the week ended May 22, the Labour Department said. That was the lowest since mid-March 2020 and marked the fourth straight weekly decline in applications.
The decrease was led by Washington state, Florida and New Jersey. Economists polled by Reuters had forecast 425,000 applications for the latest week. Though claims remain well above the 200,000 to 250,000 range that is viewed as consistent with healthy labour market conditions, they have dropped from a record 6.149 million in early April 2020.
Pandemic-related restrictions on businesses have been rolled back, with more than half of adults in the United States fully vaccinated against Covid-19, leaving factories, construction sites, restaurants and bars, among many, clamouring for workers.
Republican governors in at least 23 states, including Florida and Texas, have announced they are ending unemployment programs funded by the federal government next month, including a weekly $300 subsidy, which businesses say are discouraging the jobless from seeking work.
There is, however, no consensus that the generous unemployment benefits are keeping people home. According to JPMorgan economist Daniel Silver, an analysis of unemployment rates, wage growth and labour force participation rates in the 23 states suggested the early termination of the special benefits programs was motivated by politics rather than economics.
A survey by Poachedjobs.com, a national job board for the restaurant/hospitality industry, found most had returned to work, with a full schedule of 30-40 hours a week.
Fewer than 100,000 people filed claims last week under the Pandemic Unemployment Assistance (PUA) program for the self-employed, gig workers and others who do not qualify for the regular state programs. The early termination of PUA and broadening economic re-engagement could push claims even lower and shrink the jobless rolls in the months ahead.
In a separate report on Thursday, the Commerce Department confirmed that gross domestic product increased at a 6.4% annualized rate last quarter. The unrevised estimate followed a 4.3% growth rate in the fourth quarter.
Before tax corporate profits slipped $0.2 billion after decreasing $31.4 billion in the October-December period. A rise in domestic nonfinancial corporation profits was offset by lower domestic financial corporation and international profits.
The strong growth momentum held early in the second quarter, with another report from the Commerce Department showing orders for non-defence capital goods excluding aircraft, a closely watched proxy for business spending plans, jumped 2.3% in April.
These so-called core capital goods orders increased 1.6% in March. Shipments of core capital goods gained 0.9% after rising 1.5% in March. Core capital goods shipments are used to calculate equipment spending in the GDP measurement.
With households sitting on at least $2.3 trillion in excess savings, demand booming, inventories low and profits rebounding, businesses are likely to continue investing in equipment to boost production, supporting manufacturing.
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