WASHINGTON: The number of Americans filing new claims for unemployment benefits held below pre-pandemic levels last week, while consumer spending increased solidly, putting the economy on track for a strong finish to 2021.
But price pressures continued to build up, with a measure of underlying inflation recording its largest annual increase since 1989 in November. The reports on Thursday came as the nation was struggling with a resurgence in Covid-19 infections, driven by the Delta and highly transmissible Omicron variant, which could crimp economic growth in the first quarter.
“Rising virus cases are a near term risk but overall, we expect growth to pick up in the fourth quarter from a subdued pace in the third quarter,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.
Initial claims for state unemployment benefits were unchanged at a seasonally adjusted 205,000 for the week ended Dec. 18, the Labor Department said. Early this month, claims dropped to a level last seen in 1969.
Economists polled by Reuters had forecast 205,000 applications for the latest week. Claims have declined from a record high of 6.149 million in early April of 2020.
Applications typically increase during the cold weather months, but an acute shortage of workers has disrupted that seasonal pattern, resulting in lower seasonally adjusted claims numbers in recent weeks.
There were sharp declines in unadjusted claims in Missouri and Pennsylvania, which offset an increase in California.
“Looking past that noise, however, we expect claims to remain around 200,000 as layoffs remain low amid tight labor market conditions,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York.
“The spread of the Omicron variant may lend an upside risk to that forecast, but for now, it appears as though businesses are striving to remain open.” The claims data covered the period during which the government surveyed businesses for the nonfarm payrolls portion of December’s employment report.
Claims dropped between the November and December survey periods, suggesting a pickup in job growth this month. Labour shortages, however, remain a challenge. There are hopeful signs that unemployed Americans are starting to return to the labour force, but soaring coronavirus infections could be an obstacle.
The number of people continuing to receive benefits after an initial week of aid fell 8,000 to 1.859 million in the week ended December 11. That was the lowest level for the so-called continuing claims since mid-March of 2020. — Reuters
