The number of Americans filing for unemployment benefits rose to the highest level in nearly five months last week. However, this situation is unlikely to cause a change in the still extremely tight labor market.
According to the latest report of the US Department of Labor, unemployment in America fell to the lowest level in the last 52 years as of the end of May. This data reveals the strength of the labor market.
News that companies are freezing hiring or considering starting layoffs in anticipation of the economy going into recession in the coming year is leading to even closer monitoring of weekly unemployment benefits. However, the demand for personnel in the USA continues to be high. It is noted that as of the end of April, 11 million 400 thousand positions are waiting to be filled.
“The wide-ranging hiring challenges are deterring companies from laying off staff,” said Dante DeAntonio, economist at financial services firm Moody’s Analytics.
Highest level since January
State unemployment benefits applications rose 27 thousand last week to 229 thousand as of the week ended June 4, according to seasonally adjusted data. This number marks the highest number of applications for unemployment benefits since mid-January.
The data includes the National Memorial Day holiday. According to the government’s model to rule out seasonal changes in the data, seasonal factors account for a 21,362 drop in applications, given that hiring increases in the summer.
According to seasonally unadjusted data, applications increased by 1,8 thousand last week to 184,604.
Applications increased in the states of Florida, Georgia, and Pennsylvania, while decreased in Mississippi and Michigan.
The US dollar appreciated against other currencies as stock values fell on Wall Street. The prices of US Treasury bills, on the other hand, fell.
Applications for unemployment benefits in the United States fell to 166,000 in March, the lowest level in the last 53 years. In April 2020, when the pandemic was most effective, applications rose to a record level and 6 million 137 thousand people applied for unemployment benefits.
Will applications for unemployment benefits increase?
Isfar Münir, from financial services firm Citigroup, said: “It is unlikely that applications for unemployment benefits will deviate from current levels without easing in the job markets. A return to a more normal employment market will lead to an increase in unemployment applications.”
The Central Bank (FED), which tries to reduce the demand for personnel in order to fight inflation, but also avoids raising the unemployment rate, is expected to increase the interest rate by 50 basis points next Thursday. The FED is expected to raise the policy rate by an additional half point in July. The Fed has increased the overnight rate by 75 basis points since March.
The government reported last Friday that non-farm employment increased by 390,000 in May, with the unemployment rate hovering at 3.6 percent for the third consecutive month. Economists expect the unemployment rate to decline in the coming months.
The Ministry of Labor report shows that the number of people who continued to receive unemployment benefits after the first week was 1 million 306 thousand as of the week ending May 28. This level of data was last recorded in 1969. As of the end of May, the insured unemployed rate remained at a record low of 9 per thousand.
DeAntonio from Moody’s Analytics said, “The insured unemployment rate indicates that the official unemployment rate will fall further, possibly approaching 3 percent. For the FED to soft landing, employment growth needs to cool.”