Initial filings for unemployment insurance dipped last week and remained close to their lowest level in more than 50 years, the Labor Department reported Thursday.
Jobless claims for the week ended Dec. 25 totaled 198,000, less than the 205,000 Dow Jones forecast and a dip of 8,000 from the previous period.
When adjusting for weekly volatility, the four-week moving average for claims came to 199,250, the lowest level since Oct. 25, 1969.
Continuing claims, the data for which runs a week behind the headline number, dropped by 140,000 to 1.72 million, the lowest level since March 7, 2020, just before the Covid pandemic declaration.
The numbers reflect an increasingly tight labor market and come with the Federal Reserve pulling back on some of the historically accommodative policy it put in place during the crisis. The national unemployment rate has dropped to 4.2%, a far cry from the 14.8% peak in April 2020.
The surge in the omicron variant, though, could apply some downward pressure to the labor market.
“Initial claims are extremely low, and continued claims are low and steadily declining. Demand for labor is very strong and workers are in short supply, so businesses are not laying off employees. Those workers who do find themselves unemployed can quickly find new jobs,” wrote Gus Faucher, chief economist at PNC Financial. “But the omicron variant is a substantial downside near-term risk to the outlook for job growth.”
Despite the downward trend in initial claims, the total of those receiving benefits under all programs rose by nearly 40,000 to 2.18 million, according to data through Dec. 11.
Some of the decline in claims has come from the ending of benefits through programs created during the pandemic that provided enhanced and extended payments. Still, the total getting benefits is a far cry from where it was a year ago when 20.5 million were on the various programs.
“The expectation was that a fading in the pandemic, reopenings at schools and childcare centers, and the gradual reentrance of people who lost their unemployment insurance benefits in September into the workforce will help relieve labor shortages and allow for continued strong job growth next year,” Faucher added. “However, rising coronavirus cases due to the omicron could put the labor force recovery on hold, at least over the next couple of months.”
The jobs market also has seen a record pace of people quitting their jobs, many for better opportunities elsewhere as average hourly earnings climb in an inflationary environment the U.S. has not seen in decades.
The Fed has responded to inflation by speeding up the pace at which it is reducing its monthly bond purchases. That program is expected to be completed in a few months, and markets expect the central bank to start raising interest rates in March 2022.