WASHINGTON - The number of new claims for unemployment benefits decreased further last week, while layoffs were held on to their workers in just over 21 years in July by companies under a labor shortage.
Initial claims for state unemployment benefits fell 14,000 to a seasonally adjusted 385,000 for the week ended July 31, Labor Department said on Thursday. Economists polled by Reuters predicted 384,000 applications for the latest week.
Claims have moved sideways in July with economists blamed California, which they said was moving an additional mile to clear its backlog of applications. This has helped to keep claims above pre-pandemic levels of 256,000, though they have dropped from a record 6.149 million in early April 2020.
Nearly half of the population has been vaccinated against COVID 19, which allowed people to travel, frequent restaurants, visit casinos and attend sporting events among services-related activities curbed early during the pandemic. But infections of COVID- 19 are surge, driven in part by the detrital variant of the coronavirus.
While economists do not expect large-scale business shutdowns as what happened in the pandemic, there are fears that rising cases could slow the labor market recovery amid a shortage of workers. As of May 15th, there were a record 9.2 million job openings. Currently, 9.5 million people are unemployed.
The economy recovered fully the short debating loss of output experienced during the sharp pandemic recession in the second quarter.
The elephant in the room is the Delta variant, said James McCann, deputy chief economist at Aberdeen Standard Investments in Boston. It has not yet had major changes in public health restrictions, but it could make some people nervous about going back to work, especially in those states where vaccine hesitancy holds back progress.
The claim data does not have an impact on the department of employment report for July, due Friday for release, as it falls outside the survey period. According to a Reuters survey of economists, nonfarm payrolls in July likely rose by 880,000 jobs. In June the economy created 850,000 jobs.
July's nonfarm payroll estimate is mixed, with labor market indicators uncertain. In a separate report on Thursday, global outplacement firm Challenger, Gray Christmas said job cuts announced by U.S. based employers fell 7.5% to 18,942 in July, the lowest since June 2000. Employers have announced 231,603 job cuts so far this year, down 87.5% compared to the same period last year. In a healthy economy, there is a lot of churn. Right now, things seem to be stalling, said Gray Christmas, senior vice president at Challenger, Andrew Challenger. The positions and workers are not connecting.
Data from Homebase, a payroll tracking and tracking company, showed its workers working index was moderately changed in July from June. The ADP Employment report - and subsequent reports - showed the smallest private payroll gain in July in five months of May.
However, that was countered by two ISM Surveys - Supply Management showing a rebound in manufacturing and services employment last month. The Conference Board's labor market differential, derived from data on consumer opinions on whether jobs are plentiful or hard to get, reached its highest level since 2000 in July.