WASHINGTON: The number of Americans filing new claims for unemployment benefits increased last week for the first time in 1-1/2 months, but layoffs are easing amid a reopening economy and a shortage of people willing to work.
While other data on Thursday showed factory activity in the mid-Atlantic region continuing to grow at a steady pace in June, a measure of future production surged to its highest level in nearly 30 years. Factories in the region that covers eastern Pennsylvania, southern New Jersey and Delaware also reported stepping up hiring, which bodes well for job growth this month.
The scarcity of labour is a hurdle to faster employment growth. The Federal Reserve on Wednesday held its benchmark short-term interest rate near zero and said it would continue to inject money into the economy through monthly bond purchases. The US central bank brought forward its projections for the first post-pandemic interest rate hikes into 2023 from 2024. "We continue to see labour market progress, but as has been the case through the pandemic, the situation remains fluid," said AnnElizabeth Konkel, an economist at Indeed Hiring Lab. "We are in a wildly different place than we were in June 2020, but we have not crossed the finish line just yet."
Initial claims for state unemployment benefits rose 37,000 to a seasonally adjusted 412,000 for the week ended June 12, the Labour Department said. That was the first increase since late April. Economists polled by Reuters had forecast 359,000 applications for the latest week.
The increase in claims was led by California, Kentucky and Pennsylvania. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 8,000 to 395,000.
The economy, ironically, is facing a labour crunch despite employment remaining 7.6 million jobs below its peak in February 2020. A shortage of childcare facilities is keeping some parents, mostly women, at home.
Generous government-funded unemployment benefits, including a $300 weekly check, have also been blamed, as well as a reluctance by some to return to work out of fear of contracting Covid-19 even though vaccines are widely accessible.
Pandemic-related retirements and transitions into new careers are also factors.
Fed Chair Jerome Powell told reporters on Wednesday he was "confident that we are on a path to a very strong labour market, a labour market that shows low unemployment, high participation, rising wages for people across the spectrum." There are a record 9.3 million job openings, while 9.3 million people are officially unemployed. In a separate report on Thursday, the Philadelphia Fed said its business conditions index dipped to a reading of 30.7 this month from 31.5 in May. But its measure of activity over the next six months surged to 69.2, the highest level since 1991, from 52.7 last month.
The survey's gauge of factory employment in the mid-Atlantic region surged to 30.7 from a reading of 19.3 May. Factories also anticipated hiring more workers over the next six months, which offers further support to the labour market. Many, however, reported that labour shortages and supply chain bottlenecks were constraining their ability to fully use their resources. Though layoffs are easing, initial claims remain well above the 200,000-250,000 range that is viewed as consistent with healthy labour market conditions. Claims have, however, dropped from a record 6.149 million in early April 2020.