Jobless claims: Another 198,000 individuals filed new claims last week

https://finance.yahoo.com/news/weekly-unemployment-claims-week-ended-dec-25-2021-194905705.html

Jobless Claims Preview: Another 205,000 Individuals Likely Filed New Claims  Last Week | JMBASHA

First-time unemployment filings fell by 8,000 claims from the previous week’s reading, marking the second lowest print during the pandemic and signaling continued recovery in the labor market as high demand for workers pours into the new year.

The Labor Department released its latest report on initial and continuing claims on 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. 25: 198,000 vs. 206,000 expected and upwardly revised to 206,000 during prior week
  • Continuing claims, week ended Dec. 18: 1.716 million vs. 1.875 million expected and downwardly revised to 1.856 million during prior week

The newest print brings the four-week moving average to 199,300 in the week ending Dec. 25, Bloomberg data reflected. Continuing claims dropped to a fresh pandemic low of 1.716 million. Forecast for this week’s jobless claims release ranged from 190,000-225,000 from 22 economists surveyed by Bloomberg.

First-time filings for unemployment remained below the 2019 average of 218,000, when the unemployment rate was at a half-century low of 3.5%, according to Bloomberg. The current unemployment rate is also expected to edge down to 4.1% in December as the labor market continues to tighten.

At 205,000, last week’s initial unemployment claims were on par with economist forecasts and below pre-pandemic levels yet again. Earlier in December, jobless claims fell sharply to 188,000, the lowest level since 1969. The prints serve an early indication of the relative strength expected to show in December’s jobs report, though the economic impact of the virus remains unclear.

“Fortunately, there’s no evidence in this data of a new wave of fresh job loss,” Bankrate senior economic analyst Mark Hamrick said, commenting on last week’s figures. “New claims are only slightly above the lowest point in decades notched a couple of weeks ago.”

“With so much uncertainty now and the high level of concern about the Omicron variant, we’ll take stability when we can get it,” Hamrick added.

Earlier this month, JPMorgan chief U.S. economist Michael Feroli predicted the unemployment rate could fall to around 3%.

“It’s stunning to see how much the rate has fallen in the last five months,” he told Yahoo Finance Live. “We expect that pace of decline to slow, but it doesn’t take much to get below 4%, even with a tick up in the labor participation rate, which has been depressed over the last year and a half.”

Record cases of COVID-19 may discourage workers from looking for work as U.S. households continue to cite fear of COVID or virus-related caretaking needs as reasons for staying out of the job market.

“The pandemic’s resurgence is affecting the economy,” Hamrick said in a note last week. “The question is for how long and how much, and it is too early to know the answers.”

$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.

Unemployment claims jumped to 419,000 last week, a sudden increase reflecting an unsettled labor market

Unemployment claims jumped last week, as the delta variant of the coronavirus sparked rising caseloads around the country and renewed fears about the potential for more restrictions and business closures.

The number of new claims grew to 419,000 from 368,000, the third time in six weeks that they had ticked up, according to data from the Department of Labor.

Economists said the uptick was concerning but cautioned that it was too early to tell whether it was a one week aberration or telegraphed a more concerning turn for the labor market.

“The unexpected bump in claims could be noise in the system, but it’s also not hard to see how the rise of the covid-19 delta variant could add thousands of layoffs to numbers that already are double what they were pre-Covid,” said Robert Frick, corporate economist at Navy Federal Credit Union.

Overall, unemployment numbers have been falling gradually from the peaks at other stages of the pandemic, but they are still well above pre-pandemic averages.

The jobless numbers have provided a jarring catalogue about the economic devastation wrought by the pandemic — spiking to records as the pandemic unfolded in March 2020, and remaining at historic high levels throughout most of 2020.

The coronavirus surge last fall helped precipitate a rise in claims that saw the labor market, as seen in the monthly jobs report, slide backward too.

But until recently, the last few months been marked by strong jobs growth and a sense of optimism as vaccinations picked up, giving economists hope that the country was back on track to recovering the nearly 7 million jobs it is still down from before the pandemic.

Now, the delta variant is driving an alarming increase in covid-19 cases around the country, according to public health officials: the number of new cases increased more than 40 percent in the last week, sending jitters through the stock market, and is raising questions about whether state and local health authorities will reinstitute restrictions to slow the virus’ spread.

A new mandate in Los Angeles county to wear masks indoors has sparked protests and anger from local officials, as other counties where cases are increasing mull similar actions.

Frick said that the report showed the potential for unemployment claims to start trending upward after months of steady declines.

“There’s definitely a correlation, however loose, that the rise in covid does cause a rise in claims,” he said. “My fear is that the rise in the delta variant could cause claims to go back up…Certainly one week doesn’t show that. But I wouldn’t be surprised if we start to see claims rise.”

Texas for example, where cases have grown 54 percent in the last week, lead the way with an increase of 10,000 new claims.

However, there are also lots of signs that the economy continues to rebound despite rising caseloads.

The more than 2.2 million people that the Transportation Security Administration said it screened at airports on Sunday was the most since late February 2020 — and nearly three times the amount it was on the same day last year.

Restaurant dining has largely rebounded in recent months, at times surpassing the levels from before the pandemic — on Saturday the number of diners was 1 percent higher than the same day in 2019, according to data from Open Table.

Last week, some 12.5 million claims were filed for unemployment insurance overall, according to the most recent numbers — down from 32.9 million filed at the same point last year.

Nevada, Rhode Island and California topped the list of states with the highest number of people on unemployment, the Labor Department said.

Economic concerns in recent months have been more focused on the ways that workers are still held back from filling some of the more than 9 million job openings in the country, than unemployment, with high hopes that school re-openings in the fall will help many parents get back into the labor force.

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.