WASHINGTON, January 20, Reuters - The number of Americans filing new unemployment benefits jumped to a three-month high last week, likely due to a winter wave of COVID 19 infections that disrupted business activity, which could affect job growth in January.
The Labor Department reported a three-week week increase in jobless claims after the holidays, which was influenced by unfavorable seasonal factors. The recent surge in applications suggests that the surge in applications is a blip due to the subsiding of coronaviruses driven by the Omicron variant, while the seasonal factors, the model used by the government to iron out seasonal fluctuations in the data.
The Omicron variant of COVID-19 is hurting the U.S. labor market, but the good news is that this will be temporary, said Ryan Sweet, senior economist at Moody's Analytics in West Chester, Pennsylvania.
For the week ending January 15, initial claims for unemployment benefits went up 55,000 to a seasonally adjusted 286,000, the highest level since mid-October. The increase was the largest since July. Economists polled by Reuters had predicted 220,000 applications for the latest week.
Unadjusted claims fell from 83,418 to 337,417 last week. The decline was less than the 138,773 decrease anticipated by the seasonal factors. In California, claims rose 6,075 but plunged 14,011 in New York.
According to a Reuters analysis, the United States has an average of 752,698 new coronaviruses a day.
Between December 29 and Jan. 10 there were 8.8 million people who reported not being at work because of coronaviruses, according to the Census Bureau's Household Pulse Survey on Wednesday. That was up from 3 million from December 1 to December 13.
The bureau's Small Business Pulse Survey showed an increase in establishments reporting large negative impacts from the Pandemic, according to the Bureau's Small Business Pulse Survey released on Thursday. It was led by accommodation and food services businesses, with big rises in education as well as arts entertainment and recreation.
The labor market setback is unlikely to stop the Federal Reserve from raising interest rates in March to tackle high inflation. In early April 2020, claims were down from a record high of 6.149 million. There are 10.6 million job openings at the end of November, and employers are desperate for workers.
The unemployment rate is at a 22 month low of 3.9%, a sign that the labor market is close to maximum employment.
According to John Lynch, chief investment officer at Comerica Wealth Management in Charlotte, North Carolina, the underlying strength in the labor market suggests that this is a temporary blip due to Omicron. We look for job growth to continue as global cyclical recovery continues. Stocks on Wall Street were higher. The dollar went up against a basket of currencies. The U.S. Treasury yield fell.
Some economists worry that the jump in claims could signal a slower downturn in economic activity than previously anticipated, due to a plunge in retail sales in December and manufacturing production.
Christopher Rupkey, chief economist at FWDBONDS, said that the higher layoffs are a cautionary tale for the economy, where the Fed will have to proceed with their interest rate hikes at a measured pace despite inflation pressures. The economy may be slowing down more than previously believed. The manufacturing seems to be picking up, though shortages and higher prices remain a headache.
The Philadelphia Fed said on Thursday its business activity index rose to 23.2 in January from 15.4 in December. Any reading above zero indicates an expansion in the region's manufacturing sector, which includes eastern Pennsylvania, southern New Jersey and Delaware.
A fourth report from the National Association of Realtors showed existing home sales fell 4.6% to a seasonally adjusted annual rate of 6.18 million units in December, as higher prices and record low inventory continued to shut out some first-time buyers.
Economists expect demand for housing to remain strong even as mortgage rates increase. Unless job and income growth slows sharply, owner-occupied housing demand is likely to remain steady, keeping upward pressure on house prices, said David Berson, chief economist at Nationwide in Columbus, Ohio.
The workers shortages are boosting wages, and households are sitting on savings accumulated during the epidemic.
The nonfarm payrolls portion of January's employment report covered the period when the government surveyed businesses for the nonfarm payrolls component of the January's employment report.
Last week, there was a jump in claims with the rise in businesses negatively impacted by COVID 19 and persistent labor shortages, which raises the risk of a drop in payrolls this month.
The economy added 199,000 jobs in December, the fewest in a year. The workforce is about 2.2 million less than before the epidemic.
The numbers report showed that the number of people receiving benefits after an initial week of aid increased by 84,000 to 1.635 million in the week ending January 8, which is a reflection of the recent softening of the labor market trend.
Van Hesser, chief strategist at Kroll Bond Rating Agency in New York, said the pandemic has displaced workers from the labor force. We need the labor force to grow to sustain healthy economic growth.