The number of new applications for unemployment benefits fell by 16,000 last week to 223,000, more good news after a surprisingly strong January jobs report.
The numbers reported Thursday morning by the Labor Department are an encouraging sign for the country’s job growth. Weekly jobless claims are seen as a proxy for layoffs and have been watched closely in recent weeks for indications about how the omicron variant of COVID-19 has been affecting the labor market. They’re now back near where they were before the pandemic, when labor markets were tight.
“The state of the job market remains rock solid based on new jobless claims as well as other key indicators,” said Mark Hamrick, senior economic analyst at Bankrate.
Jobless claims have generally trended down over the past year, with new claims averaging over 800,000 per week about a year ago, although claims ticked back up slightly in the early part of last month while the omicron variant was spiking.
Since peaking in mid-January, new cases of COVID-19 have plummeted precipitously. New daily cases are averaging about 240,000 now, compared to more than 800,000 just weeks ago. While cases and hospitalizations have dropped, reported deaths have increased slightly over the past 14 days.
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The news comes after a good January jobs report. The economy blew past expectations last month and added 467,000 jobs, much more than economists anticipated. Additionally, November and December’s lackluster reports were revised up by 710,000 jobs.
While the sliding number of new jobless claims is on balance good news for the economy, the United States is still many jobs short of pre-pandemic levels, when unemployment sat at an ultra-low 3.5%. The current 4% unemployment rate is slightly up from December.
Fears about inflation, though, have risen to the top of the agenda for federal officials. The Federal Reserve is preparing to hike interest rates in response to inflation well above its 2% target. Several rate hikes are expected this year, with the first likely to come in March.
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The strengthening employment situation will solidify the central bank’s plans to hike interest rates. Fans of dovish monetary policy have argued that rate hikes shouldn’t be so aggressive because the country isn’t at full employment. Fed Chairman Jerome Powell, though, has said that improvements in labor market conditions have been “widespread.”
“Most FOMC participants agree that labor market conditions are consistent with maximum employment,” he said after last month’s meeting of the Federal Open Market Committee.
