The number of weekly jobless filings—a proxy for layoffs—dropped by 8,000 from the prior week to below pre-pandemic levels, delivering a fresh sign of continued tightening in the U.S. jobs market.
First-time filings for unemployment insurance fell to 198,000 for the week ending Dec. 25, the Labor Department said in a report (pdf). The four-week moving average of initial claims, which smooths out seasonal fluctuations and is often seen by analysts as a better indicator of broader labor market trends, fell to 199,250, the lowest level in 52 years.
Prior to the pandemic, initial claims were running at around the 210,000 per week mark, similar to the four-week moving average. Earlier this month, first-time filings fell to their lowest level since 1969.
Thursday’s jobless filings figures suggest that the recent rise in COVID-19 infections was not driving a fresh wave of layoffs. The average number of daily COVID-19 cases in the United States has hit a record high of 346,986 over the past seven days, according to Dec. 29 Worldometers-compiled data.
“Another strong labor market number,” Allianz chief economic adviser Mohamed El-Erian said in a tweet, adding that the figures would be more impressive if the labor force participation rate—a measure of how many people work or are actively looking for jobs—were to lift from its historically depressed level.
The labor force participation rate edged up to 61.8 percent in November, according to the most recent figures from the Bureau of Labor Statistics (BLS). That’s 1.5 percentage points lower than in February 2020 far off the historical peak of 67.3 percent in April 2000.
Continuing unemployment claims, which run a week behind the initial filings figure and reflect the total number of people receiving benefits through traditional state programs, fell by 140,000 to 1.72 million—a pandemic-era low.
Thursday jobless claims figures dovetail with earlier labor market data that showed the number of job openings hovering near a record high of 11 million in October, while the so-called quits rate, which reflects worker confidence in being able to find a better job, remained close to September’s record high of 3 percent.
All this paints a picture of a relatively tight labor market, with businesses continuing to report difficulty hiring workers. The National Federation of Independent Business (NFIB) said in its most recent jobs report that small business owners continued to struggle to boost their workforce numbers in November.
Small business “owners have been increasing compensation to record-high levels to attract the right employees to their business,” NFIB Chief Economist William Dunkelberg said in a statement.
But despite the fact that businesses have been boosting wages, those gains have been erased—and then some— by inflation running at a multi-decade high. While average hourly earnings rose by 4.8 percent in the year through November, real earnings contracted by 1.9 percent when subtracting for inflation.
Dunkelberg added in a press release that small business owners were “pessimistic as many continue managing challenges like rampant inflation and supply chain disruptions that are impacting their businesses right now.”
The U.S. economy grew at a 2.3 percent annualized rate in the third quarter, sharply lower than the 6.7 percent pace of growth in the second quarter.
Economists are generally predicting a solid rebound in the final quarter of the year, as long as high inflation and a rise in COVID-19 cases don’t dampen economic activity.