Jobless claims: Another 205,000 individuals filed new claims last week

https://finance.yahoo.com/news/weekly-unemployment-claims-week-ended-dec-18-2021-232812196.html

New weekly jobless claims held below pre-pandemic levels last week, further underscoring still-solid demand for labor heading into the new year. 

The Labor Department released its latest weekly jobless claims report Thursday at 8:30 a.m. ET. Here were the main metrics from the print, compared to consensus estimates compiled by Bloomberg:

  • Initial jobless claims, week ended Dec. 18: 205,000 vs. 205,000 expected and a downwardly revised 205,000 during prior week 
  • Continuing claims, week ended Dec. 11: 1.859 million vs. 1.835 million expected and an upwardly revised 1.867 million during prior week

This week’s new jobless claims report coincides with the survey week for the December monthly jobs report from the Labor Department, offering an early indication of the relative strength expected in that print due for release in early January. 

At 205,000, initial unemployment claims were expected to come in below even pre-pandemic levels yet again, with jobless claims having averaged around 220,000 per week throughout 2019. Earlier this month, first-time unemployment filings fell sharply to 188,000, or the lowest level since 1969. And based on the latest report, the four-week moving average for new claims was near its lowest in 52 years, ticking up by 2,750 week-over-week to reach 206,250. 

Continuing claims have also come down sharply from pandemic-era highs, albeit while remaining slightly above the 2019 average of about 1.7 million. This metric, which counts the total number of individuals claiming benefits across regular state programs, came in below 2 million for a fourth straight week and reached the lowest level since March 2020.

“The claims data indicate strong demand for workers and a reluctance by businesses to lay off workers,” Rubeela Farooqi, chief economist for High Frequency Economics, wrote in a note. “However, disruptions around Omicron and Delta could be a headwind if businesses have to close for health-related reasons.”

“Overall, the direction in the labor market recovery remains positive, with demand still strong,” she added. “Labor shortages are persisting, preventing a stronger recovery, although these appeared to ease somewhat in November.” 

And indeed, policymakers have also taken note of the improving labor market situation. In a press conference last week, Federal Reserve Chair Jerome Powell maintained, “Amid improving labor market conditions and very strong demand for workers, the economy has been making rapid progress toward maximum employment.And at the close of the Federal Open Market Committee’s latest policy-setting meeting, officials decided to speed their rate of asset-purchase tapering, paring back some crisis-era support in the economy as the recovery progressed. 

Many Americans have also cited solid labor market conditions, especially as job openings hold at historically high levels. In the Conference Board’s latest Consumer Confidence report for December, 55.1% of consumers surveyed said jobs were “plentiful.” While this rate was down slightly from November’s 55.5%, it still represented a “historically strong reading,” according to the Conference Board. 

$1.7 trillion U.S. spending bill would not stoke inflation: Moody’s

Dive Brief:

  • The $1.7 trillion “social infrastructure” legislation passed by the House and now before the Senate would spur growth, expand employment and boost productivity with limited inflationary impact, according to Moody’s Investors Service.
  • The spending “would occur over 10 years, include significant revenue-raising offsets and would likely only start to flow into the economy later in 2022 at a time when inflationary pressures from disruptions to global supply chains and U.S. labor supply will likely have diminished,” Moody’s Vice President-Senior Analyst Rebecca Karnovitz said
  • “Investments in childcare, education and workforce development have the potential to boost labor force participation and increase productivity over the medium and longer term,” she said. While the Senate will likely insist on amendments, the Build Back Better (BBB) bill currently would invest $555 billion in clean energy and “climate resilience” and $585 billion in childcare, universal prekindergarten and paid family leave.

Dive Insight:

CFOs concerned about rising prices and the risk of a wage-price spiral have found sympathy from some lawmakers who warn that the $5.7 trillion in spending Congress has already approved during the pandemic will further stoke inflation.

“Inflation is hammering working families across America,” Senate Minority Leader Mitch McConnell told the chamber last week. The Kentucky Republican called BBB a “socialist wish list” and an inflationary “taxing and spending spree.”

Some Democrats — including Sens. Kyrsten Sinema of Arizona and Joe Manchin of West Virginia — have cautioned that excessive spending could push up prices and worsen the fiscal outlook.

Sinema and Manchin have said that they want less costly legislation. With Democrats holding the smallest possible Senate majority, support from the two senators is essential for final passage of the bill.

“I have been concerned about high levels of spending that are not targeted or are not efficient and effective,” Sinema told the Washington Post on Nov. 18 while noting rising inflation.

“The threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse,” Manchin said on Twitter this month after the Labor Department reported that consumer prices rose 6.2% in October on an annual basis.

CFOs face even higher price gains for wholesale goods. The producer price index for final demand, a measure of what suppliers charge, soared 8.6% in October from the prior year, according to the Labor Department. That was a record jump in a series of data first published in 2010.

The Moody’s analysis suggests that concerns about the impact of BBB on inflation and the U.S. fiscal outlook may be overblown.

“We expect the spending package to have a limited impact on inflation,” Moody’s said.

Referring to the U.S. credit outlook, Moody’s said, “we expect the legislation to have only a small effect on the sovereign’s fiscal position, given that the spending would be spread over a decade and the revenue-raising measures would help offset the impact on federal budget deficits.”

The Congressional Budget Office estimates that the House version of BBB would push up fiscal deficits by $367 billion over a 10-year period.

Yet the estimate excludes about $200 billion in revenue that would come from a provision in the bill funding tougher tax enforcement and collection, Moody’s said.

“Estimates of the bill’s impact on the deficit are likely to shift in accordance with provisions that may be stripped from the Senate’s final version of the legislation,” according to Moody’s.

CFOs working around cost pressures, labor availability

Labor Shortage, Rising Costs, Supply-Chain Hiccups Hit Manufacturers -  Bloomberg

Dive Brief:

  • While CFOs, on the whole, remain optimistic about an economic rebound this year, they’re concerned about labor availability and accompanying cost pressures, according to a quarterly survey by Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta.
  • Over 75% of CFOs included in the survey said their companies faced challenges in finding workers. More than half of that group also said worker shortage reduced their revenue—especially for small businesses. The survey panel includes 969 CFOs across the U.S.
  • CFOs expect revenue and employment to rise notably through the rest of 2021,” Sonya Ravindranath Waddell, VP and economist at the Federal Reserve Bank of Richmond said. “[But] over a third of firms anticipated worker shortages to reduce revenue potential in the year.”

Dive Insight:

As many companies struggle to find employees and meet renewed product demand, it’s unsurprising CFOs anticipate both cost and price increases, Waddell said.

About four out of five CFO respondents reported larger-than-normal cost increases at their firms, which they expect will last for several more months. They anticipate the bulk of these cost increases will be passed along to the consumer, translating into higher-priced services.

Despite labor concerns, CFOs are reporting higher optimism than last quarter, ranking their optimism at 74.9 on a scale of zero to 100, a 1.7 jump. They rated their optimism towards the overall U.S. economy at an average of 69 out of 100, a 1.3 increase over last quarter. 

For many CFOs, revenue has dipped below 2019 levels due to worker shortage, and in some cases, material shortages, Waddell told Fortune last week. Even so, spending is on the rise, which respondents chalked up to a reopening economy.

“Our calculations indicate that, if we extrapolate from the CFO survey results, the labor shortage has reduced revenues across the country by 2.1%,” Waddell added. “In 2019, we didn’t face [the] conundrum of nine million vacancies combined with nine million unemployed workers.”

Consumer prices have jumped 5.4% over the past year, a U.S. Department of Labor report from last week found; a Fortune report found that to be the largest 12-month inflation spike since the Great Recession in 2008. 

To reduce the need for labor amid the shortage, many companies will be “surviving with just some compressed margins for a while, or turning to automation,” Waddell said.