WASHINGTON, Nov 24, Reuters - The number of Americans filing new unemployment benefits dropped to their lowest level since 1969, pointing to sustained strength in the economy as a year marked by shortages and an unending epidemic winds.
The Labor Department reported a plunge in claims on Wednesday that was exaggerated by the model used by the government to strip out seasonal fluctuations from the data. The labor market recovery is gaining momentum, as the number of people on unemployment rolls hit the lowest level since March 2020, when the economy was in the grips of the first wave of COVID-19 infections.
There may be some seasonal adjustment problems, but the handwriting is on the wall and all the anecdotal reports on how companies can't find the help they need are true, said Christopher Rupkey, chief economist at FWDBONDS in New York. The economy will finish the year with a ban. Initial claims for state unemployment benefits fell 71,000 to a seasonally adjusted 199,000 for the week ended Nov. 20, the lowest level since mid-November 1969.
For the latest week, economists polled by Reuters had predicted 260,000 applications. Applications fell below their pre-pandemic average of 220,000.
Unadjusted claims went from 18,187 to 258,622 last week, due to a surge in Virginia, which offset declines in California, Kentucky and Missouri.
The report was published early because of the Thanksgiving holiday on Thursday. The data could become noisy over the holiday season. Since the pandemic, claims have declined from a record high of 6.149 million in early April 2020 and are now in a zone viewed as being consistent with a healthy labor market, though an acute shortage of labor is hindering job growth.
There is a chance that there will be an increase in the labor pool. The number of people continuing to receive benefits fell from 60,000 to 2.049 million in the week ending Nov. 13, according to the claims report. It was the lowest level since March in 2020.
Employment growth has averaged 582,000 jobs per month this year. As of September, there were 10.4 million job openings. The workforce is down 3 million people from its pre-pandemic level, even as generous federal government-funded benefits have expired, schools are open for in-person learning and companies are raising wages.
The jump in claims is consistent with data on retail sales and manufacturing production that suggests that the economy was regaining momentum in the fourth quarter after hitting a speed bump in July-September due to the coronaviruses cases and shortages became more widespread over the summer.
A Commerce Department report on Wednesday confirmed the slowdown in growth in the third quarter. The government said in its second estimate of GDP growth for the period, gross domestic product increased at a 2.1% annualized rate. That was the slowest growth pace in more than a year, but was revised slightly higher from the 2.0% expansion reported in October.
Economists had predicted that third-quarter GDP growth would be raised to a 2.2% pace. The economy grew at a 6.7% rate in the second quarter. The slight upward revision reflected a more moderate pace of inventory drawdown than originally estimated, which offset a big step-down in consumer spending.
That is all in the rear-view mirror. A Commerce Department report showed orders for non-defense capital goods excluding aircraft increased by 0.6% last month, a closely watched proxy for business spending plans. Economists had predicted that core capital goods orders would go up by 0.5%.
There was an increase in prices last month because of global shortages of goods. Business spending on equipment contracted in the third quarter after four straight quarters of double-digit growth.
It was weighed down by a shortage of motor vehicles. A global shortage of semiconductors is undercutting motor vehicle production. Consumer spending has regained speed in October, with retail sales surging last month as Americans kicked off their holiday shopping early in order to avoid shortages and pay even more for scarce goods.