A recent downward trend in worker filings for jobless
benefits stalled in mid-June amid other signs the labor market continues to
gradually recover.
The Labor Department reported Thursday that initial
unemployment claims, a proxy for layoffs, moved slightly lower last week to a
seasonally adjusted 411,000 from an upwardly revised 418,000 the prior week,
when claims rose. The four-week average for claims, which smooths out
volatility in the weekly figures, rose slightly off a pandemic low to 397,750.
While last week’s initial claims were higher than projected
and claims overall remain above pre-pandemic levels, their downward trajectory,
along with a pickup in hiring, a declining unemployment rate and optimistic
consumer sentiment, points to gains for the U.S. labor market.
Claims are down sharply from the depths of the
Covid-19-induced downturn during 2020, and are hovering at levels half of what
they were in January this year. Weekly claims totals are down more than 40%
from the 742,000 total posted the week ended April 3.
“The overall trend is in the right direction,” said Jordan
van Rijn, senior economist at the Credit Union National Association. “Right
now, there’s a lot of demand for labor out there and it’s the workers that are
a little more in the driver’s seat,” he added.
Around 3.4 million people were claiming ongoing unemployment
benefits through regular state programs as of the week ended June 12, a decline
from the previous week. Roughly 14.8 million Americans were claiming benefits
through all unemployment programs, including special pandemic-related programs,
as of the week ended June 5.
“The data overall this week and in recent weeks have been
confirming that there is a labor market recovery that’s under way, but that
there are still some frictions that are in place that are drawing out the
process somewhat,” said Robert Rosener, senior U.S. economist at Morgan
Stanley.
Mr. Rosener said the claims and other labor market data
suggest steady job growth during June. He projects the U.S. economy will add
620,000 jobs this month.
Employers are reporting increased demand for workers as U.S.
Covid-19 cases have declined and more people have received vaccinations. State
and local governments have phased out restrictions on business, and Americans
have increased activities such as traveling and dining out.
Separate data released Thursday by the Commerce Department
also pointed to a strengthening economic recovery. Orders for long-lasting
manufactured goods rose 2.3% last month.
The report showed new orders for nondefense capital goods
excluding aircraft—so-called core capital-goods orders, a closely watched proxy
for business investment—declined 0.1% in May from April. Such orders were up
2.7% the prior month.
Low business and retail inventories have translated to
increased demand for manufacturers for much of the past year, but supply-chain
issues continue to constrain production and delay some shipments.
“There’s good underpinnings for momentum to resume in the
months ahead” should those issues ease, said Mr. Rosener, speaking of orders
related to business investment.
The Commerce Department also released updated calculations
of U.S. gross domestic product—a broad measure of the economy’s output of goods
and services. The update said GDP rose at an annual rate of 6.4% in the first
quarter, matching previous estimates.
The pace of jobs growth has lagged behind the broader
economic bounceback, which many economists have attributed to a variety of
factors that they expect will ease over the summer and into the fall.
Those factors include lingering health and child-care
concerns. Republican-controlled states also are withdrawing from federal
pandemic programs meant to enhance state unemployment benefits.
Many Republicans say the enhancements—particularly a federal
$300 supplement to state benefits—are keeping workers on the sidelines.
Democrats say the extra benefits are a key support for families and those out
of work during a still-emerging recovery.
Half of U.S. states have said they would end the supplement
before the scheduled, nationwide expiration in September. Four U.S. states
ended it on June 12, with the others to follow in the weeks through early July,
according to data compiled by Jefferies.
Nela Richardson, chief economist at payroll-processing firm
ADP, said the end of the supplement might prompt more workers to seek out jobs,
but that the pace of job creation is still likely to be choppy.
“It’s easy to pretend that everything has just reassembled
with the snap of a finger, but those infrastructures that help people work are
still being rebuilt,” she said, referring to issues such as child care.
Eliza Forsythe, a labor economist at the University of
Illinois at Urbana-Champaign, said the pace of hiring may be less robust than
previously anticipated in part because the number of people on temporary layoff
has plummeted, compared with earlier in the pandemic.
That would suggest, Dr. Forsythe said, that workers seeking
jobs currently are looking for new positions rather than returning to their old
jobs.
About 1.82 million unemployed people were on temporary
layoff last month, compared with 18.05 million in April 2020, according to
Labor Department data.
“We have reallocation happening, where most of the people
who are coming back to work are searching for a new employer, potentially
changing occupation or industry, so that process is a lot slower,” Dr. Forsythe
said.
Competition among employers for new hires is shifting
bargaining power to workers, also likely affecting the rate of job creation,
said Joseph Brusuelas, chief economist at RSM.
“That may be resulting in a slower-than-expected pace in the
improvement because workers can now be a little more picky, a little more
choosy about where they want to work,” Mr. Brusuelas said.
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