A “Now Hiring” advertisement in a store window in Bay Shore, New York, on March 24, 2022.
Steve Pfost/Newsday RM via Getty Images
Claims for unemployment insurance last week fell to their lowest level in more than 50 years — yet another sign workers are reaping the benefits of a hot labor market.
Americans filed 166,000 initial claims for jobless benefits in the week ended April 2, the Labor Department said Thursday. Initial claims are a proxy for layoffs.
The figure is a pandemic-era low. It also nearly ties the all-time trough.
The Labor Department began tracking jobless claims in 1967. Since then, just one other week in history has seen fewer claims for benefits: 162,000 in November 1968.
However, today’s labor force is over double its size in 1968 (about 79 million people versus 164 million), making last week’s milestone noteworthy on a proportional basis.
“Employers appear to be holding on to their workers very tightly, as affirmed by the latest look at new jobless claims,” according to Mark Hamrick, senior economic analyst at Bankrate.
Other federal data indicate a strong labor market for workers, too.
Job openings and the number of people who leave their job voluntarily each remain near record-high levels set at the end of 2021.
Many have left their jobs for other opportunities amid the high demand for labor and for a big bump in pay. Annual wage growth has been higher than at any point in over 20 years, according to economists at Indeed, a job site, as employers compete for talent.
The rate at which businesses are laying off workers is also near a record low as businesses try to hold onto their staff.
The national unemployment rate — 3.6% in March — is approaching historic lows, too. It has fallen near the 3.5% prepandemic rate in February 2020, which had been the lowest unemployment rate since December 1969.
Workers on the sidelines have rejoined the labor force at a fast clip in recent months, according to Jim Baird, chief investment officer at Plante Moran Financial Advisors.
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More than 2.1 million workers have come back in the last three months alone, providing a “fresh pool of available workers to fuel continued job creation,” he said.
“Demand for labor remains strong and layoffs should remain low as employers struggle to fill near-record openings,” Baird added.
While the U.S. economy hasn’t yet fully regained all the 22 million jobs lost in the early months of the pandemic, the rapid pace of job creation puts the country on a trajectory to regain them in June (if the current trend holds).
Headwinds
However, there are headwinds that may have a dampening effect on the labor market.
The Federal Reserve, the U.S. central bank, in March began a cycle of raising its benchmark interest rate to cool the economy and rein in inflation. Higher rates make it more expensive for consumers and businesses to borrow money.
And inflation, which is running at a 40-year high, is pushing up prices for goods and services across the economy. The average person has seen rising costs eclipse their wage growth, eroding purchasing power. (This isn’t true for all workers, though, such as nonsupervisory workers in bars and restaurants, whose wage growth has risen faster than inflation.)
Treasury Secretary Janet Yellen also warned Wednesday that Russia’s attack on Ukraine “will have enormous economic repercussions for the world.”
These challenges will test households and businesses in coming months, Hamrick said.
“That [unemployment] claims remain so low at a time of such turmoil suggests that, for now at least, the economy is holding up in the face of soaring crude oil, gasoline and other prices,” Hamrick said. “How long this can persist remains to be seen.”