The number of new applications for unemployment benefits fell by 18,000 last week to 215,000, near the lowest levels in decades, another encouraging sign for the labor market after a surprisingly good January jobs report.
Weekly jobless claims are seen as a proxy for layoffs and have been watched closely in recent weeks for indications about how COVID-19 has been affecting the labor market. This week’s decline continues a generally downward trend in jobless claim reports since the omicron variant peaked in mid-January.
Declining layoffs will help President Joe Biden, who has been plagued with low approval ratings and disapproval with how his administration has handled the country’s inflationary woes. It will also bolster the Federal Reserve’s campaign to raise interest rates.
“We expect initial claims to continue to grind back toward 200k as the impact of the Omicron variant increasingly fades. Layoffs are expected to be minimal in a tight labor market where employers continue to struggle to attract workers,” said economists with Oxford Economics in a note on Thursday morning.
POWELL SIGNALS FED WILL HIKE RATE HIKES THIS MONTH DESPITE UNCERTAINTY OVER UKRAINE
Jobless claims have been in a steady decline over the last year. Around this time in March 2021, new claims were averaging more than 700,000 per week. Even during this year’s surge in COVID-19 cases related to the omicron variant, jobless claims only increased slightly, showing resiliency in the country’s economic recovery.
Since the job market has been improving, the biggest economic hurdle now facing the country is inflation. Consumer prices increased 7.5% for the 12 months ending in January, the highest pace in decades.
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The Federal Reserve is gearing up to hike interest rates for the first time in years this month, even despite uncertainty involving the Russian invasion of Ukraine.
“The bottom line is we will proceed, but we will proceed carefully as we learn more about the implications of the Ukraine war for the economy,” Fed Chairman Jerome Powell told Congress on Wednesday. “We will avoid adding uncertainty to what is already an extraordinarily challenging, uncertain environment.”
