Jobless claims tumble to 199,000, lowest level since 1969


 The number of Americans filing for unemployment benefits last week fell to the lowest level in more than half a century, the latest sign the labor market is bouncing back from the coronavirus pandemic.

Figures released Wednesday by the Labor Department show that unemployment applications for the week ended Nov. 20 tumbled to 199,000 from a revised 270,000 last week, easily topping the 260,000 forecasts by Refinitiv analysts. It's unclear 

It marked the best level of jobless claims since Nov. 15, 1969, when there were 197,000 applicants, and has fallen below the February 2020 pre-pandemic average of 211,700. 

While it's unclear what precipitated the stunning drop, economists said it could be evidence that employers – faced with an incredibly tight labor market – are curbing layoffs and making an effort to retain the workers they already have as a record number of employees quit their jobs in search of more money and greater flexibility.

"Layoffs are hitting new lows amid ongoing labor shortages as employers look to hold onto hard-to-find workers," said Daniel Zhao, chief economist at Glassdoor, wrote on Twitter. (Zhao also cautioned about making historical comparisons using jobless claims data due to changes in unemployment insurance programs over time regarding eligibility and other factors).

The Labor Department reported earlier this month that there were 10.4 million open jobs at the end of September. Though little changed from the end of August, it's still a staggeringly high figure; there are about 3 million more open jobs than unemployed Americans looking for work.  

Still, seasonal adjustments seemed to play some type of role in the better-than-expecting reading: Unadjusted claims totaled 258,622 – a 7.6% increase from the previous week.

"The drastic drop in weekly jobless claims reeks of seasonal adjustment noise, especially considering the unadjusted number rose by 18,000," said Robert Frick, corporate economist at Navy Federal Credit Union. "Especially with COVID-19 cases rising, a drop seven times the recent average seems highly unlikely."

A separate economic report released Wednesday morning by the Commerce Department showed that second-quarter GDP growth was revised up slightly to 2.1%. It was below Refinitiv estimates for 2.2%.

U.S. consumers ramped up spending in October, helping to power the broader economic recovery as businesses stepped up investment and jobless claims fell to historic lows in a tightening labor market.

Household spending rose 1.3% in October from a month earlier, while personal income increased 0.5% last month, the Commerce Department said Wednesday. Consumers are benefiting from a strong labor market.

Jobless claims, a proxy for layoffs, fell to 199,000 last week, the lowest weekly level in 52 years, the Labor Department reported Wednesday. The sharp decline in unemployment claims suggests rising wages and bountiful job openings could continue to buttress consumer spending—the economy’s main engine—despite fading government stimulus and dwindling savings.

“The consumer is still a big driver,” said Derrick Fung, chief executive at Cardify.ai, a market research firm. “We’re forecasting a very strong holiday season.”

Spending on goods was up 2.2% in October, with increases for big-ticket and smaller purchases, while outlays on services grew 0.9% last month.

New orders for nondefense capital goods excluding aircraft—a closely watched proxy for business investment—were up 0.6% in October compared with the previous month, the Commerce Department said in a separate report released Wednesday. Business investment has grown solidly this year as companies invest in technologies in the midst of labor shortages.

Still, companies like manufacturers are facing higher material and shipping costs, as well as labor and parts shortages that could delay some shipments this holiday season. Orders for durable, or long-lasting goods, decreased for the second straight month in October amid the supply constraints, Commerce said.

Some sectors that are particularly vulnerable to the pandemic are starting to see a pickup and are in a much better position than a year earlier. For instance, international travel to the U.S. is on the rise following the removal of the travel ban on Europeans, Jefferies economists said in a note. Spending among tourists could help boost U.S. retail sales, the economists said.

Spending on goods is well above pre-pandemic levels, while spending on services remains lower than in February 2020, the month before the pandemic hit the U.S. economy.

Strong consumer demand for everything from apparel to electronics to hardware is boosting sales at several of the biggest U.S. retailers, despite rising prices. The retail chains Target Corp. and TJX Cos. said they were able to sidestep supply-chain snarls to post strong sales in the most recent quarter and stock up with goods for Black Friday and the holiday season.

The combination of strong demand snarled supply chains, higher prices, and an unbalanced labor market is making for an unusual holiday season in which record sales might be accompanied by shortages and long waits for goods. Inflation might also start to cut into demand for consumers with lower incomes who could put off purchases because of price increases, according to economists.What the Inflation of the 1970s Can Teach Us Today

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What the Inflation of the 1970s Can Teach Us Today
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Covid-19 is still disrupting the economy and poses a risk to the outlook. Virus cases have risen this month, and some public-health experts warn that cases could continue to climb as people gather indoors during the winter.

Kaitlyn Fischer, 21 years old, of Battle Creek, Mich., lost one of her gigs as a nanny recently because of a client’s concern about Covid-19. Her income fell from about $350 to $400 a week from $700. She has been searching for another job but said there are few vaccinated families in the area or ones who are seeking child care during the hours she can provide and at the pay rate she desires.

Because of her tight financial situation, she said she is spending less on Christmas gifts than in previous years. She bought her mom a watch on clearance for about $20, the most expensive Christmas gift she has purchased. Ms. Fischer said that she normally loves to give gifts but that holiday shopping has been stressful this year.

Ms. Fischer received all three federal stimulus checks that were distributed during the pandemic. She had to spend about half the money on emergency expenses such as housing-related repairs and saved the rest.“I also feel super guilty only being able to spend $20 on a gift for someone,” she said. “It just feels a little bit less special.”

Across the U.S., savings have dwindled from higher levels earlier in the pandemic and are near 2019 levels. Americans were saving at an annualized rate of $1.336 trillion in September, compared with $5.764 trillion in March, when a fresh round of stimulus started reaching bank accounts.

Seventy-seven percent of Americans say that inflation is affecting their lives personally, according to a recent poll.

Some 37 percent of respondents say inflation has impacted them “a great deal,” and 40 percent say it has had “some” impact, according to the Yahoo News/YouGov survey.

When divided by political party, 50 percent of Republicans said that inflation impacted them a great deal, compared to 25 percent of Democrats and 38 percent of Independents. 

Forty-nine percent of participants said that they blamed the coronavirus pandemic “a great deal,” and 31 percent said they blamed it “some” for the inflation, which Labor Department data recently showed is at a 30-year high.

Thirty-nine percent blamed President Biden "a great deal" and 18 percent blamed him "some."

When asked directly where people placed "the most" responsibility, 35 percent responded Biden, and 30 percent said the pandemic.

The poll also showed that 43 percent of adults approved of how Biden was handling his job as president.

The survey included a sample of 1,696 U.S. adults and was conducted from Nov. 17 to 19. The margin of error is 2.6 percentage points. 

The consumer price index (CPI) rose 0.9 percent in October and 6.2 percent in the 12-month period that ended that month.

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