The number of Americans claiming unemployment benefits unexpectedly increased last week, with some economists claiming that expired federal unemployment benefits could be behind the increase.
The economic recovery in the United States is still on track, but the job market is signaling that growth is slowing in the face of challenges ranging from the spread of the Delta variant of COVID-19 to leaner unemployment benefits.
Weekly jobless claims, an indicator of layoffs, rose 11,000 more than expected last week to 362,000, the US Department of Labor said Thursday. This is the third week in a row that initial requests have increased, and the highest reading since early August.
The biggest jump by state came from California, where nearly 18,000 more people claimed initial unemployment benefits last week than the week before.
Goldman Sachs economists believe the expiration of federal unemployment benefits earlier this month may have been a factor in increasing the number of Californians claiming state unemployment benefits.
“The increase in initial jobless claims was again sparked by an increase in California likely related to transitions from expired federal UI benefits to other benefit programs,” Goldman said in a note to clients.
The number of Americans currently receiving unemployment benefits – a measure known as continuing claims – fell by 18,000 in the week ending September 18.
The health of the labor market is a key barometer for the world’s largest economy.
The country’s labor market has recovered from substantial losses from last year’s shutdowns, but 5.3 million jobs are still missing to return to pre-pandemic levels – and this deficit does not account for growth labor force or economy since then.
And while the economy has steadily created jobs every month this year, it created a disappointing 235,000 jobs in August as hiring slowed in customer-facing industries amid the increase. infection rates of the highly contagious Delta variant of the coronavirus.
The US Department of Labor will release its closely watched monthly employment report for September on Friday.
Federal Reserve Chief Jerome Powell has said he and his fellow policymakers are determined to keep their money cheap policies if that’s what it takes to get Americans back to work.
But there is currently a mismatch in the US labor market between the number of unemployed Americans and the record number of job postings that have caused employers to scramble to fill positions. In July, some 10.9 million jobs in the United States were begging.
And jobs are only created when employers actually add a worker to their payroll.
This week, Powell told lawmakers on Capitol Hill that “factors related to the pandemic, such as healthcare needs and lingering fears of the virus, appear to be weighing on job growth.”
Inflation complicates the picture. The Fed has a dual mandate to bring the economy to maximum jobs while keeping inflation within its long-term target range of 2%.
Inflation has moved well above that target this year, with companies removing virus restrictions, triggering bottlenecks for raw materials and labor, and increasing shipping costs.
But Powell has repeatedly said that he and his fellow policymakers see inflation as a temporary by-product of economic reopening and that prices will eventually moderate.
In a separate report released Thursday, the US Department of Commerce said the US economy grew 6.7% in the second quarter compared to the same period a year earlier. The revised figure has been adjusted slightly upwards from the previous estimate.
But many economists expect growth to slow in the third quarter of this year, largely due to the spread of the Delta variant.