The number of American workers filing weekly jobless claims—a proxy for layoffs—have declined for the third straight week, pointing to further firming of an already tight labor market.
First-time filings for unemployment insurance came in at 223,000 for the week ending Feb. 5, down 16,000 from the prior week’s revised level of 239,000, the Labor Department said in a Feb. 10 report (pdf).
“The state of the job market remains rock solid based on new jobless claims as well as other key indicators,” Bankrate Senior Economic Analyst Mark Hamrick told The Epoch Times in an emailed statement.
Despite a winter spike in Omicron cases that sent a ripple across the economy, there was a burst of hiring in January, with U.S. employers adding 467,000 jobs, topping estimates of 150,000.
“The recently released January jobs report included more jobs creation than forecast, accompanied by significant upward revisions in payrolls for the previous two months,” Hamrick said. “Layoffs, broadly speaking, remain something of a non-issue for the macro economy.”
Also in January, the labor force participation rate rose to 62.2 percent while average hourly earnings surged at an annualized rate of 5.7 percent. The annual wage bump was the highest on record with the exception of a sharp, one-month increase in wages in April 2020. That’s when millions of relatively low-paid workers lost their jobs while their relatively high-paid counterparts remained employed, with the structural shift in employment composition leading to a boost in average wages.
Surging inflation, however, which in the year through January hit a 40-year high of 7.5 percent, has more than erased all the wage gains, putting earnings into negative territory in real terms and eroding the purchasing power of many American households.
Real average hourly earnings, which are inflation-adjusted, declined 1.7 percent in the 12 months through January, according to Feb. 10 data from the Bureau of Labor Statistics (BLS). When combining the real hourly wage decline with a 1.4 percent drop in the average workweek, real average weekly earnings over the period fell by 3.1 percent.
Accelerating prices and further firming in the labor market have prompted the Fed to signal readiness to pick up the pace of dialing back loose monetary settings.
“Inflation readings in the U.S. are at their highest levels in nearly 40 years, and nominal wages are accelerating at a faster pace than we have seen in decades,” Loretta Mester, president of the Cleveland Fed and a voting member of the Federal Open Market Committee (FOMC), said in prepared remarks on Wednesday for a virtual event hosted by the European Economics and Financial Centre.
Noting that inflation risks are “tilted to the upside,” Mester said she backs raising the Fed’s key interest rate in March and supports a more aggressive stance on tightening accommodative monetary policies.
Markets are pricing in five rate hikes through 2022.