The number of Americans filing new claims for unemployment benefits unexpectedly rose last week, but the increase likely understates the rapidly improving labor market conditions as more parts of the economy reopen and fiscal stimulus kicks in.
Initial claims for state unemployment benefits totaled a seasonally adjusted 744,000 for the week ended April 3 compared to 728,000 in the prior week, the Labor Department said on Thursday. Economists polled by Reuters had forecast 680,000 applications in the latest week.
The government reported last week that the economy created 916,000 jobs in March, the most in seven months. Job openings increased to a two-year high in February. Still, employment remains 8.4 million jobs below its peak in February 2020.
The labor market has regained its footing after stumbling in December, thanks to the White House’s massive $1.9 trillion pandemic rescue package and an acceleration in the pace of vaccinations against COVID-19, which are allowing more services businesses to resume operations.
In the minutes of the Federal Reserve’s March 16-17 policy meeting released on Wednesday, U.S. central bank officials acknowledged the improvement in labor market conditions and “expected strong job gains to continue over coming months and into the medium term.”
Several Fed officials suggested that the latest relief package “could hasten the recovery, which could help limit longer-term damage in labor markets caused by the pandemic.”
Though claims have dropped from a record 6.149 million in early April 2020, they are more than double their prepandemic level. In a healthy labor market, claims are normally in a 200,000 to 250,000 range. Part of the elevation in claims is because of fraud and backlogs clogging the system following the enhancement of the unemployment benefit programs.
The government is paying a weekly $300 unemployment supplement, as well as funding benefits for the self-employed, gig workers and others who do not qualify for the regular state unemployment insurance programs.
The weekly subsidy and the Pandemic Unemployment Assistance program will run through Sept. 6.
“The total number of filings for all unemployment insurance programs has remained stubbornly steady over the last few months despite net rehiring in monthly employment reports,” said Veronica Clark, an economist at Citigroup in New York.
“This could partly be a reflection of more workers wanting to stay on unemployment benefits even if some return to work part time given the greater size of payments.”
Anecdotal evidence suggests companies are recalling workers laid off during the pandemic and hiring new employees. An Institute for Supply Management survey on Monday showed services businesses reporting they “have recalled everyone put on waivers and made new hires” and had “additional employees added to service the needs of new customers at new locations.”
Diversified financial services firm Fidelity Investments said on Wednesday it was hiring approximately 4,000 employees across the United States over the next six months, with more than half of these positions expected to be filled by mid-year.