Tag Archives: U.S. labor market

U.S. labor market recovery gaining steam; worker shortages an obstacle

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits fell more than expected last week, while layoffs plunged to a 21-year low in June, suggesting the labor market recovery from the COVID-19 pandemic was gaining traction.

But a shortage of willing workers is hampering hiring, with other data on Thursday showing a measure of employment at factories contracting in June for the first time in seven months. Manufacturers said they were experiencing “difficulty in hiring and retaining direct labor,” the Institute for Supply Management (ISM) said in its survey of national factory activity, noting that these challenges “across the entire value chain continue to be the major obstacles to increasing growth.”

One respondent in primary metals said “lack of labor is killing us.”

The data was released ahead of Friday’s closely watched employment report for June, which according to a Reuters survey of economists will likely show nonfarm payrolls increasing by 700,000 jobs last month after rising by 559,000 in May. The unemployment rate is forecast to tick down to 5.7% from 5.8%.

The economy is experiencing a boom in demand following a reopening made possible by vaccinations against the coronavirus, with more than 150 million Americans fully immunized.

“America’s back to work and an important milestone was reached where new claims are back below the 400,000 barrier after a hiccup at the start of June,” said Chris Rupkey, chief economist at FWDBONDS in New York. “Summer is always the strongest season for hiring each year, and this year is no exception.”

Initial claims for state unemployment benefits dropped 51,000 to a seasonally adjusted 364,000 for the week ended June 26, the Labor Department said. That was the lowest number since March 2020, when mandatory shutdowns of nonessential businesses were enforced to slow the first wave of COVID-19 infections.

The improvement in claims had appeared to stall in mid-June. Though claims remain above the 200,000-250,000 range that is viewed as consistent with a healthy labor market, they have tumbled from a record 6.149 million in early April 2020.

Economists polled by Reuters had forecast 390,000 applications for the latest week. There was a big decline in filings in Pennsylvania, which reversed the prior week’s surge. The state last month upgraded its filing system, and the transition could be causing volatility in the data. There were also large drops in claims in California, Kentucky and Texas.

The claims data could become noisy in the weeks ahead as 25 states with mostly Republican governors pull out of federal government-funded unemployment programs, including a $300 weekly check, which businesses complained were encouraging the jobless to stay at home. The early termination began on June 5 and will run through July 31, when Louisiana, the only one of those states with a Democratic governor, ends the weekly check.

For the rest of the country, these benefits will lapse on Sept. 6. There is no evidence so far of a surge in job searches in the 20 states that have already ended the federal benefits.

A survey this week by job search engine Indeed found that while the vast majority of the unemployed indicated they would like to start looking for work in the next three months, many did not express a sense of urgency. But rising vaccinations, dwindling savings and the opening of schools in the fall will be key to pulling them back into the labor force.

The claims report showed the number of people continuing to receive benefits after an initial week of aid rose 56,000 to 3.469 million during the week ended June 19. There were 14.7 million people receiving benefits under all programs in mid-June, slightly down from 14.8 million early in the month.

Stocks on Wall Street were trading mostly higher. The dollar edged up against a basket of currencies. U.S. Treasury prices fell.

EMPLOYEE POACHING

In a separate report on Thursday, ISM said its index of national factory activity slipped to 60.6 last month from 61.2 in May. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy.

A measure of factory employment contracted for the first time since November. Companies reported hiring or attempting to hire. A significant number reported “employee turnover due to wage dynamics in the markets,” ISM’s Timothy Fiore said.

“It appears that companies are paying up to steal workers from other firms,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

Lack of affordable child care and fears of contracting the coronavirus have also been blamed for keeping workers, mostly women, at home. There were a record 9.3 million job openings at the end of April and 9.3 million people were officially unemployed in May.

A third report from global outplacement firm Challenger, Gray & Christmas showed job cuts announced by U.S.-based employers tumbled 16.7% to 20,476 in June, the lowest level since June 2000. Layoffs plummeted 88% compared to June 2020.

There were 67,975 job cuts in the second quarter, the fewest since the April-June period in 1997. In the first half of this year, layoffs dropped 87% to 212,661, the lowest total for the January-June period since 1995.

“We’re seeing the rubber band snap back,” said Andrew Challenger, senior vice president at Challenger, Gray & Christmas. “Companies are holding on tight to their workers during a time of record job openings and very high job seeker confidence. We haven’t seen job cuts this low since the Dot-Com boom.”

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. labor market worse than it appears, Fed paper suggests

SAN FRANCISCO (Reuters) – U.S. labor market signals are conflicting to an “unprecedented” degree, but those suggesting labor market slack should be given more weight than those pointing to tightness, according a paper published Monday by the San Francisco Federal Reserve Bank.

The paper looked at 26 labor market measures that typically move in tandem and found that during the current recovery they are giving wildly divergent signals about the health of the job market.

The job openings rate, for instance, suggests the job market is much tighter than the unemployment rate; the labor force participation rate points to much more slack than detected in the unemployment rate.

Because the pandemic has forced so many people out of the workforce, “negative signals such as the low labor force participation rate provide a better read than do the positive signals,” the researchers argued. “Overall, our findings reveal that the labor market situation is worse than some headline numbers suggest.”

U.S. central bankers are debating how tight the U.S. labor market has become amid widespread reports from employers about hiring difficulties even as the economy still has 8 million fewer people working than before the pandemic.

The question matters because the Fed says it could start reducing its support for the economy once inflation and the labor market have made “substantial further progress” toward the Fed’s goals of 2% inflation and maximum employment. It hasn’t, however, laid out exactly how it will measure that progress.

The U.S. unemployment rate was 6.1% in April and a reading for May is due out on Friday.

(Reporting by Ann Saphir; Editing by Steve Orlofsky)

Subsiding layoffs raise cautious optimism for U.S. labor market

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new applications for unemployment benefits decreased further last week, suggesting the labor market was stabilizing as authorities started to loosen pandemic-related restrictions on businesses.

Despite the signs that layoffs are abating, the weekly jobless claims report from the Labor Department on Thursday showed at least 17.8 million Americans were on benefits in mid-January, indicating that long-term unemployment was likely becoming entrenched. That could boost President Joe Biden’s push for the U.S. Congress to pass his $1.9 trillion recovery plan.

Treasury Secretary Janet Yellen told ABC’s Good Morning America that the massive stimulus plan was needed to overcome the economic pain caused by the COVID-19 pandemic.

“It’s too early to predict that this begins a strong reversal of excruciatingly high layoffs,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia. “Another round of stimulus is important.”

Initial claims for state unemployment benefits fell 33,000 to a seasonally adjusted 779,000 for the week ended Jan. 30. That was the third straight weekly decline. Economists polled by Reuters had forecast 830,000 applications for the latest week.

Unadjusted claims decreased 23,525 to 816,247 last week. Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs, 1.165 million people filed claims last week, down from 1.243 million in the prior period.

Claims remain above their 665,000 peak during the 2007-2009 Great Recession, but well below the record 6.867 million last March when the pandemic hit the United States.

Part of the elevation in claims reflects people re-applying for benefits after the government in late December renewed a $300 unemployment supplement until March 14 as part of a pandemic relief package worth nearly $900 billion.

“The decline in new claims in recent weeks adds to the evidence that the worst months for the labor market could very well be behind us,” said Sarah House, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

Stocks on Wall Street were trading higher. The dollar rose against a basket of currencies. U.S. Treasury prices were mostly lower.

LAYOFFS SUBSIDING

Though January was the worst month since the onset of the pandemic, the decline in economic activity leveled off in the second half of the month amid signs of a peak in the recent coronavirus wave.

Data from Homebase, a payroll scheduling and tracking company, showed its measure of employees at work flattened out over the last two weeks of January, pausing the decline observed from December into January.

Other data on Thursday from global outplacement firm Challenger, Gray & Christmas showed planned job cuts announced by U.S.-based employers rose only 3.3% to 79,552 in January.

The claims report also showed the number of people receiving benefits after an initial week of aid dropped 193,000 to 4.592 million during the week ended Jan. 23. About 17.836 million people were on unemployment benefits on all programs in mid-January, down from 18.322 million in the first week of 2021.

Last week’s claims data has no bearing on Friday’s closely watched employment report for January, as it falls outside the survey period, which was in the middle of the month. Still, the signs of stability in other labor market measures support expectations that hiring rebounded in January after the economy shed jobs in December for the first time in eight months.

Hopes that the economy created jobs last month were boosted by reports on Wednesday showing rebounds in private payrolls and services industry employment in January. A survey this week also showed manufacturers hired more workers in January.

According to a Reuters poll of economists payrolls likely increased by 50,000 jobs in January after declining by 140,000 in December. In the wake of the fairly upbeat reports, Goldman Sachs lifted its payrolls forecast by 75,000 to 200,000.

But some economists are bracing for a second straight month of job losses in January. The Conference Board’s survey last week showed consumers’ perceptions of labor market conditions deteriorated further last month.

The economy has recouped 12.5 million of the 22.2 million jobs lost in March and April. The Congressional Budget Office estimated on Monday that employment would not return to its pre-pandemic level before 2024.

Economists were unperturbed by a separate report on Thursday from the Labor Department showing worker productivity dropped at a 4.8% annualized rate in the fourth quarter. That was the deepest pace of decline since the second quarter of 1981 and followed a 5.1% pace of expansion in the third quarter. The pandemic has caused wild swings in productivity.

“This decline came after very strong productivity growth in the middle quarters of the year, and we think that the pandemic has led to a shift in economic activity away from some low-productivity sectors that has led to firming in productivity growth through some of the noise in the quarterly readings,” said Daniel Silver, an economist at JPMorgan in New York.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)

U.S. labor market slowing as fiscal stimulus fades

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits unexpectedly increased last week, supporting views the economic recovery from the COVID-19 pandemic was running out of steam amid diminishing government funding.

The weekly jobless claims report from the Labor Department on Thursday, the most timely data on the economy’s health, also showed 26 million people were on unemployment benefits in early September. The faltering labor market recovery and a recent rise in new coronavirus infections has piled pressure on Congress and the White House to come up with another rescue package.

Federal Reserve Chair Jerome Powell told lawmakers on Wednesday that Congress and the U.S. central bank needed to “stay with it” in working to support the economy’s recovery. More fiscal stimulus is looking increasingly unlikely before the Nov. 3 presidential election.

“The high level of joblessness shows that the country isn’t out of the woods yet and it won’t be if the pleading of Fed officials for more stimulus isn’t heard by government officials down in Washington,” said Chris Rupkey, chief economist at MUFG in New York. “The economy is running on empty.”

Initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 870,000 for the week ended Sept. 19. Data for the prior week was revised to show 6,000 more applications received than previously reported. Economists polled by Reuters had forecast 840,000 applications in the latest week.

Unadjusted claims increased 28,527 to 824,542 last week. Economists prefer the unadjusted claims number given earlier difficulties adjusting the claims data for seasonal fluctuations because of the economic shock caused by the coronavirus crisis.

Six months after the pandemic started in the United States, jobless claims remain above their 665,000 peak during the 2007-09 Great Recession, though applications have dropped from a record 6.867 million at the end of March.

While the reopening of businesses in May boosted activity, demand in the vast services industries has remained lackluster, keeping layoffs elevated. Job cuts have also spread to industries such as financial services and technology that were not initially impacted by the mandated business closures in mid-March because of insufficient demand.

A total 630,080 applications were received for the government-funded pandemic unemployment assistance last week. The PUA is for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs. Altogether, 1.5 million people filed claims last week.

Stocks on Wall Street were trading lower. The dollar gained versus a basket of currencies. U.S. Treasury prices rose.

STALLED PROGRESS

The claims report also showed the number of people receiving benefits after an initial week of aid dropped 167,000 to 12.58 million in the week ending Sept. 12.

Economists believed the so-called continuing claims are declining as people exhaust their eligibility for benefits, which are limited to 26 weeks in most states.

Indeed, just under one million workers exhausted their first six months of state unemployment benefits in August. At least 1.6 million workers filed for extended unemployment benefits in the week ending Sept. 5, up 104,479 from the prior week.

The continuing claims data covered the period during which the government surveyed households for September’s unemployment rate. The decline in mid-September implied a further decrease in the unemployment rate from 8.4% in August.

“Only faster progress against the virus itself will assuage the unemployment struggles of so many workers in fields like entertainment who can’t return to their jobs until social distancing restrictions are relaxed ,” said Andrew Stettner, senior fellow at The Century Foundation in New York.

The Fed has cut interest rates to near zero and vowed to keep borrowing costs low for a while, and has also been pumping money into the economy. Government money to help businesses has virtually dried up. Tens of thousands of airline workers are facing layoffs or furloughs next month.

A $600 weekly unemployment benefits supplement ended in July and was replaced with a $300 weekly subsidy, whose funding is already running out. The death toll from COVID-19 in the country topped 200,000 on Tuesday, the highest number of any nation.

The ebbing fiscal stimulus is already restraining the economy after activity rebounded sharply over the summer. Gross domestic product is expected to rebound at as much as a record 32% annualized rate in the third quarter after tumbling at a 31.7% rate in the April-June period, the worst performance since the government started keeping records in 1947.

But retail sales and production at factories moderated in August. Business activity cooled in September, reports have shown. Goldman Sachs on Wednesday cut its fourth-quarter GDP growth estimate to a 3% rate from a 6% pace, citing “lack of further fiscal support.”

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. jobless claims remain elevated amid second layoffs wave

By Lucia Mutikani

WASHINGTON (Reuters) – The novel coronavirus crisis continues to pummel the U.S. labor market, with the number of Americans filing for unemployment benefits falling less than expected last week, suggesting a second wave of layoffs in industries and jobs not initially impacted by business closures caused by the pandemic.

The Labor Department’s weekly jobless claims report on Thursday, the most timely data on the economy’s health, supports economists’ contention that it would take a while for activity to rebound after almost grounding to a halt in mid-March as authorities tried to slow the spread of COVID-19, the respiratory illness caused by the virus.

Federal Reserve Chair Jerome Powell warned of an “extended period” of weak growth and stagnant incomes. Though many parts of the country are reopening, businesses and factories are operating well below capacity. More states and local governments are laying out plans to restart their economies.

“The U.S. labor market remains under tremendous pressure, although the pace of job losses is at least slowing,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. “The key question is how quickly businesses will rehire workers in the weeks ahead as restrictions on movement are gradually lifted.”

Initial claims for state unemployment benefits totaled a seasonally adjusted 2.981 million for the week ended May 9, the Labor Department said on Thursday. While that was down from 3.176 million in the prior week and marked the sixth straight weekly drop, claims remain astoundingly high.

Economists polled by Reuters had forecast applications for unemployment benefits totaling 2.5 million in the latest week. Claims have been gradually decreasing since hitting a record 6.867 million in the week ended March 28.

U.S. stocks opened lower as investors grappled with the possibility of prolonged economic weakness due to the coronavirus pandemic. The dollar was little changed against a basket of currencies. U.S. Treasury prices rose.

MILLIONS UNEMPLOYED

The latest numbers lifted to 36.5 million the number of people who have filed claims for unemployment benefits since mid-March, or more than one in five workers losing their job.

Economists said weak demand is causing layoffs of workers in industries and jobs not initially affected by the coronavirus shutdowns. They also attributed the continued elevation in claims to the processing of application backlogs, which accumulated as state unemployment offices were overwhelmed by the unprecedented wave of applications.

The economy lost a staggering 20.5 million jobs in April, the steepest plunge in payrolls since the Great Depression of the 1930s. While there are no signs yet that the reopening of businesses will ease unemployment, there is cautious hope that April was probably the trough for job losses during this economic downturn, which has also been marked by the sharpest decline in output since the 2007-09 Great Recession.

Some businesses have accessed loans from an almost $3 trillion fiscal package, which could be partially forgiven if they used the credit for employee salaries. But many small enterprises are expected to close permanently, leaving some of the 21.4 million people who lost their jobs in March and April out of work for a long time.

Thursday’s claims report also showed the number of people receiving benefits after an initial week of aid increased 456,000 to a record 22.833 million for the week ending May 2. The so-called continuing claims data is reported with a one-week lag and will be closely watched in the coming months to get a better sense of the depth of the labor market downturn.

“Jobless claims pour cold water on the V-shaped recovery talk,” said Chris Rupkey, chief economist at MUFG in New York. “Economic growth might get a boost from pent-up demand, but the labor markets have dug themselves a deeper hole that will be harder to climb back out of.”

The Labor Department also reported that 3.4 million people had their applications for Pandemic Unemployment Assistance (PUA) processed in the week ending April 25. The PUA program covers gig workers and many others who do not qualify for regular insurance unemployment but have been forced out of work because of COVID-19.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)