Continuing claims for unemployment benefits fell 48,000 to 1,475,000 last week, the Department of Labor reported Thursday, the lowest level since 1970 and a sign that jobs are abundant and the labor market is tight.
Separately, the number of new applications for unemployment benefits rose by 18,000 last week to 185,000, remaining near the lowest level for initial claims since 1969. Weekly jobless claims are seen as a proxy for layoffs and have been watched closely as the Federal Reserve hiked its interest rate target.
“Despite the increase, claims are still at very low levels, underscoring historically tight labor market conditions. We expect initial claims to remain below 200k in the weeks ahead, as employers, who continue to struggle to attract and retain workers, will keep layoffs to a minimum,” economists from Oxford Economics said.
The trend of decreasing layoffs and fewer people receiving unemployment benefits is good economic news for President Joe Biden, who is staring down falling approval ratings and public displeasure with how his administration has handled the explosive inflation afflicting the country.
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New jobless claims have been in retreat over the past year. Around this time in April of last year, new claims were averaging more than 550,000 per week.
Thursday’s report comes the same week as news was released that consumer prices increased 8.5% in the 12 months ending in March, a faster pace than at any time since December 1981, when the United States was still in the throes of the Great Inflation.
Producer prices also increased to a scorching 11.2% for the year ending in March. The index gauges the wholesale prices of goods, which are eventually passed down to consumers, signaling that inflation is still in full swing.
The spiraling inflation coupled with the decreasing jobless claims gives the Federal Reserve, which just raised interest rates for the first time in years, increased confidence in its plans to tighten monetary policy and jack up interest rates.
Many expect the central bank to hike rates more aggressively than initially expected at next month’s meeting. Most investors now foresee a half-point hike in May, with the likelihood of the more aggressive rate hike occurring pegged at more than 86%, according to CME Group’s FedWatch tool, which calculates the probability using Fed fund futures contract prices.
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In more positive economic news, the economy added 431,000 jobs in March, and unemployment fell to pre-pandemic rates, signaling that the labor market is quite hot.
Labor force participation also surged in March. For workers in their prime working years, ages 25 to 64, the overall employment rate is now just half a percentage point from where it was prior to the pandemic.
