WASHINGTON: The number of Americans filing new claims for unemployment benefits unexpectedly rose in the first week of January amid raging COVID-19 infections, but remained at a level consistent with rapidly tightening labor market conditions.
Other data on Thursday suggested the worst of high inflation was probably behind. Producer prices recorded their smallest gain in 13 months in December as the cost of goods declined. The drop in goods prices was the first since April 2020.
“These are still subdued readings on jobless claims and do not change our view that job creation continued at a solid pace into January despite the spread of Omicron,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
Initial claims for state unemployment benefits increased 23,000 to a seasonally adjusted 230,000 for the week ended Jan. 8, the Labor Department said. Economists polled by Reuters had forecast 200,000 applications for the latest week.
A surge in coronavirus cases, driven by the Omicron variant, has disrupted activity from airlines to schools as workers call in sick. Unadjusted claims jumped 103,693 to 419,446 last week.
They were driven by a surge in New York, which has seen sky-rocketing coronavirus infections. There were also big increases in filings in California, Florida, Kentucky, Missouri, Tennessee, Texas, Utah and Indiana. But applications fell significantly in Connecticut, Massachusetts and Michigan.
Still, claims remain below their pre-pandemic level, a sign of strengthening labor market conditions. They have declined from a record high of 6.149 million in early April 2020. Employers are hanging on to their workers, with 10.6 million job openings at the end of November.
The Federal Reserve’s Beige Book report on Wednesday of anecdotal information on business activity, collected from contacts nationwide on or before Jan. 3, showed many were allowing part-time work or adjusting qualifications “to attract more applicants and retain existing workforces.”
More workers are getting off unemployment benefits rolls, which could help to boost the labor pool.
The claims report showed the number of people receiving benefits after an initial week of aid dropped 194,000 to 1.559 million in the week ended Jan. 1. This is the lowest level for these so-called continuing claims since June 1973.
The government reported last Friday that the unemployment rate fell to a 22-month low of 3.9% in December, an indication that the labor market is at or close to maximum employment. The workforce is about 2.2 million people smaller than before the pandemic.
Shrinking labor market slack and surging inflation are leading economists to expect the Fed to increase interest rates in March. The US central