The number of Americans filing new claims for unemployment benefits fell to a 16-month low last week as the labor market steadily gains traction, but worker shortages are frustrating efforts by businesses to ramp up hiring to meet strong demand for goods and services, APA reports citing Reuters.
While other data on Thursday showed import prices rose solidly in June, prices have likely peaked, which could support the view that high inflation is transitory. The economy's recovery from the COVID-19 pandemic has been accompanied by faster inflation, reflecting strong demand and supply constraints.
Federal Reserve Chair Jerome Powell told lawmakers on Wednesday that "inflation has increased notably and will likely remain elevated in coming months before moderating."
Initial claims for state unemployment benefits fell 26,000 to a seasonally adjusted 360,000 for the week ended July 10, the lowest level since mid-March 2020, the Labor Department said. Data for the prior week was revised to show 13,000 more applications received than previously reported.
Economists polled by Reuters had forecast 360,000 applications for the latest week. On an unadjusted basis, claims rose 544 to 383,166 last week.
Claims have struggled to make further progress since dropping below 400,000 in late May, even as at least 20 states led by Republican governors have pulled out of federal government-funded unemployment programs. Unemployed people are required to file claims under the regular state programs to determine eligibility for federal benefits.
The early termination of the federal programs followed complaints by businesses that the benefits, including a $300 weekly check, were encouraging unemployed Americans to stay at home. The economy is experiencing a shortage of workers, with a record 9.2 million job openings as of the end of May.
About 9.5 million people are officially unemployed. The disconnect has also been blamed on lack of affordable child care, fears of contracting the coronavirus as well as pandemic-related career changes and retirements. There is so far little evidence that the early termination of federal benefits, which started on June 12 and will run through July 31, has led to a surge in job searches.
The expanded benefits will lapse on Sept. 6 for the rest of the country. Powell told the U.S. House of Representatives Financial Services Committee on Wednesday that he expected that "job gains should be strong in coming months as public health conditions continue to improve and as some of the other pandemic-related factors currently weighing them down diminish."