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The number of Americans filing new jobless claims for unemployment benefits fell last week to a near 52- year low, the Labor Department said on Thursday.
Initial claims for state unemployment benefits dropped to a seasonally adjusted 198,000 for the week ended Dec. 25 from a revised 206,000 a week earlier. Just a few weeks ago, claims dropped to a level last seen in 1969.
“Initial claims are extremely low, and continued claims are low and steadily declining. Demand for labor is very strong and workers are in short supply, so businesses are not laying off employees. Those workers who do find themselves unemployed can quickly find new jobs,” wrote Gus Faucher, chief economist at PNC Financial. “But the omicron variant is a substantial downside near-term risk to the outlook for job growth.”
Economists polled by Reuters had forecast 208,000 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. Discounting the weekly volatility, the labor market is tightening, with the unemployment rate at a 21-month low 4.2%.
There were a record 11.0 million job openings at the end of October. Higher wages as companies scramble for scarce workers are helping to underpin consumer spending.
The economy grew at a 2.3% annualized rate in the third quarter, with consumer spending rising at a 2.0% pace. Growth forecasts for the fourth quarter are as high as a 7.2% rate. For the whole of 2021, the economy is expected to grow 5.6%, which would be the fastest since 1984, according to a Reuters survey of economists. The economy contracted 3.4% in 2020.
Questions are now arising over how sustainable that momentum may prove to be with Omicron’s rapid spread pushing COVID-19 infections back to record highs, exceeding even last winter’s crushing wave. On top of that, the Biden administration’s $1.75 trillion domestic investment plan is stalled in the U.S. Senate.
