U.S. jobless claims unexpectedly rise, data remains volatile

WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits rose unexpectedly last week, an indication that the labor market recovery from the COVID-19 pandemic continues to be choppy.

Businesses have reopened at a rapid clip, boosted by a rollback in restrictions now that more than 155 million Americans have been fully vaccinated against the coronavirus. Still, the job market rebound has been anything but steady despite recent employment gains.

Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 373,000 for the week ended July 3, the Labor Department said on Thursday. Economists polled by Reuters had forecast 350,000 applications for the latest week.

Lack of affordable child care and fears of contracting the coronavirus have been cited for keeping workers, mostly women, at home. There were a record 9.2 million job openings at the end of May and 9.5 million people were officially unemployed in June.

The data comes on the heels of an encouraging monthly jobs report from the Labor Department last Friday, which showed U.S. companies hired the most workers in 10 months in June.

Claims have dropped from a record 6.149 million in early April 2020 but remain above the 200,000-250,000 range that is seen as consistent with a healthy labor market.

The four-week moving average of claims, considered a better measure of labor market trends as it smooths out week-to-week volatility, fell 250 to 394,750.

The claims data may remain volatile in the coming weeks as 25 states with mostly Republican governors pull out of federal government-funded unemployment programs. These included a $300 weekly check, which businesses complained were encouraging the jobless to stay at home.

The early termination began on June 5 and will run through July 31, when Louisiana, the only one of those states with a Democratic governor, ends the weekly check.

For the rest of the country, these benefits will lapse on Sept. 6.

The claims report also showed the number of people continuing to receive benefits after an initial week of aid declined 145,000 to 3.339 million during the week ended June 26. There were 14.2 million people receiving benefits under all programs in late June, a fall from 14.7 million earlier in the month.

(Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci)

U.S. labor market healing despite unexpected rise in weekly jobless claims

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits increased last week for the first time in 1-1/2 months, but layoffs are easing amid a reopening economy and a shortage of people willing to work.

While other data on Thursday showed factory activity in the mid-Atlantic region continuing to grow at a steady pace in June, a measure of future production surged to its highest level in nearly 30 years. Factories in the region that covers eastern Pennsylvania, southern New Jersey and Delaware also reported stepping up hiring, which bodes well for job growth this month.

The scarcity of labor is a hurdle to faster employment growth. The Federal Reserve on Wednesday held its benchmark short-term interest rate near zero and said it would continue to inject money into the economy through monthly bond purchases. The U.S. central bank brought forward its projections for the first post-pandemic interest rate hikes into 2023 from 2024.

“We continue to see labor market progress, but as has been the case through the pandemic, the situation remains fluid,” said AnnElizabeth Konkel, an economist at Indeed Hiring Lab. “We are in a wildly different place than we were in June 2020, but we have not crossed the finish line just yet.”

Initial claims for state unemployment benefits rose 37,000 to a seasonally adjusted 412,000 for the week ended June 12, the Labor Department said. That was the first increase since late April. Economists polled by Reuters had forecast 359,000 applications for the latest week.

The increase in claims was led by California, Kentucky and Pennsylvania. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 8,000 to 395,000.

The economy, ironically, is facing a labor crunch despite employment remaining 7.6 million jobs below its peak in February 2020. A shortage of childcare facilities is keeping some parents, mostly women, at home.

Generous government-funded unemployment benefits, including a $300 weekly check, have also been blamed, as well as a reluctance by some to return to work out of fear of contracting COVID-19 even though vaccines are widely accessible.

Pandemic-related retirements and transitions into new careers are also factors.

Fed Chair Jerome Powell told reporters on Wednesday he was “confident that we are on a path to a very strong labor market, a labor market that shows low unemployment, high participation, rising wages for people across the spectrum.”

The White House also struck an optimistic note on the labor market, with senior economic adviser Jared Bernstein saying: “I saw a labor market that continues to improve, continues to grow as shots in arms and checks in pockets have helped pull this recovery forward.”

Iowa, Mississippi and Missouri terminated all federal government-funded emergency benefits last Saturday, while Alaska ended only the $300 supplement. Twenty-one other states also led by Republican governors, including Texas and Florida, will end these benefits for residents between June 19 and July 10.

Louisiana is ending the weekly supplementary check on July 31, the only state with a Democratic governor to terminate the federal benefits. For the rest of the country, they will lapse on Sept. 6.

Iowa reported an increase in claims for the regular state unemployment insurance program last week, while Alaska, Mississippi and Missouri saw declines. Only Alaska reported a decrease in claims for the government-funded Pandemic Unemployment Assistance.

Economists are watching the 26 states to see if their actions will boost employment or labor force participation over the summer, which could offer clues on labor market trends for the rest of the year when all government aid lapses.

There are a record 9.3 million job openings, while 9.3 million people are officially unemployed.

“We also could see added noise in the claims report if people end up trying to shuffle between programs or re-determine eligibility,” said Daniel Silver, an economist at JPMorgan in New York.

Stocks on Wall Street were mixed while the dollar rose against a basket of currencies. Longer-dated U.S. Treasury prices were trading higher.

STRONG FACTORY HIRING

In a separate report on Thursday, the Philadelphia Fed said its business conditions index dipped to a reading of 30.7 this month from 31.5 in May. But its measure of activity over the next six months surged to 69.2, the highest level since 1991, from 52.7 last month.

The survey’s gauge of factory employment in the mid-Atlantic region surged to 30.7 from a reading of 19.3 May. Factories also anticipated hiring more workers over the next six months, which offers further support to the labor market. Many, however, reported that labor shortages and supply chain bottlenecks were constraining their ability to fully use their resources.

Though layoffs are easing, initial claims remain well above the 200,000-250,000 range that is viewed as consistent with healthy labor market conditions. Claims have, however, dropped from a record 6.149 million in early April 2020.

Last week’s claims data included the period during which the government surveyed business establishments for the nonfarm payrolls component of June’s employment report. The economy created 559,000 jobs in May after adding 278,000 in April.

To get a better picture of how hiring fared in June, economists will await data next week on the number of people continuing to receive benefits after an initial week of aid.

The so-called continuing claims, which are reported with a one-week lag, edged up 1,000 to 3.518 million in the week ended June 5. There were 14.8 million people collecting unemployment checks under all programs at the end of May.

(Reporting by Lucia Mutikani; Additional reporting by Evan Sully and Trevor Hunnicutt; Editing by Chizu Nomiyama, Andrea Ricci and Paul Simao)

U.S. job growth improves; desperate employers raise wages to attract workers

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. employers increased hiring in May and raised wages as they competed for workers, with millions of unemployed Americans still at home because of childcare issues, generous unemployment checks and lingering fears over COVID-19.

Though the pickup in job growth shown in the Labor Department’s closely watched employment report on Friday missed economists’ forecasts, it offered some assurance that the recovery from the pandemic recession remained on track.

Growth is being supported by vaccinations against COVID-19, massive fiscal stimulus and the Federal Reserve’s ultra-easy monetary policy stance. April’s nonfarm payrolls count, which delivered about a quarter of the new jobs economists had forecast, caused handwringing among some analysts and investors that growth was stagnating at a time when inflation was rising.

“There are still a lot of people unemployed, but there does not seem to be a lot of eagerness to work,” said Chris Low, chief economist at FHN Financial in New York. “There would have been many more hires if employers could find more people.”

Nonfarm payrolls increased by 559,000 jobs last month. Data for April was revised higher to show payrolls rising by 278,000 jobs instead of 266,000 as previously reported.

That left employment about 7.6 million jobs below its peak in February 2020. Economists polled by Reuters had forecast 650,000 jobs created in May. About 9.3 million people were classified as officially unemployed last month. There are a record 8.1 million unfilled jobs.

At least half of the American population has been fully vaccinated against the virus, according to data from the U.S. Centers for Disease Control and Prevention.

That has allowed authorities across the country to lift virus-related restrictions on businesses, which nearly paralyzed the economy early in the pandemic. But the reopening of the economy is straining the supply chain.

Millions of workers, mostly women, remain at home as most school districts have not moved to full-time in-person learning. Despite vaccines being widely accessible, some segments of the population are reluctant to get inoculated, which labor market experts say is discouraging some people from returning to work.

Government-funded benefits, including a $300 weekly unemployment subsidy, are also constraining hiring. Republican governors in 25 states are terminating this benefit and other unemployment programs funded by the federal government starting next Saturday.

These states account for more than 40% of the workforce. The expanded benefits end in early September across the country. That, together with more people vaccinated and schools fully reopening in the fall, is expected to ease the worker crunch.

Labor Secretary Marty Walsh said the argument that enhanced benefits were discouraging job seeking was not supported by what workers were telling him.

“Working people across America are eager to work,” said Walsh in a statement. “But workers also told me about the challenges they and their families face, finding affordable childcare, caring for elderly parents and grandparents”

Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. U.S. Treasury prices rose.

WILLING WORKERS IN SHORT SUPPLY

Average hourly earnings rose a solid 0.5% after shooting up 0.7% in April. That raised the year-on-year increase in wages to 2.0% from 0.4% in April. Wages in the leisure and hospitality sector jumped 1.3%, the third straight month of gains above 1%.

Postings on Poachedjobs.com, a national job board for the restaurant/hospitality industry, are showing restaurants offering as much as $30-$35 per hour for lead line cooks.

Sustained wage growth could strengthen the argument among some economists that higher inflation could last longer rather than being transitory as currently envisioned by Fed Chair Jerome Powell. A measure of underlying inflation tracked by the Fed for its 2% target accelerated 3.1% on a year-on-year basis in April, the largest increase since July 1992.

Still, most economists do not expect the U.S. central bank to start withdrawing its massive economic support anytime soon.

“The data will likely reinforce the view of most Fed officials that progress has not been ‘substantial’ enough for them to start signaling tapering,” said Jim O’Sullivan, chief U.S. macro strategist at TD Securities in New York.

The average workweek held steady at 34.9 hours. That together with strong wage gains lifted an income proxy 0.9%, matching April’s gain. This bodes well for consumer spending, which could also get a powerful tailwind from the more than $2.3 trillion in excess savings amassed during the pandemic.

Economists are sticking to their forecasts for double-digit growth this quarter.

Last month’s increase in hiring was led by the leisure and hospitality industry, which added 292,000 jobs, with restaurants and bars accounting for 186,000 of those positions. Local government education employment rose by 53,000 jobs as the resumption of in-person learning and other school-related activities in some parts of the country continued.

Manufacturing payrolls increased by 23,000 jobs. But construction employment decreased by 20,000 jobs.

The unemployment rate fell to 5.8% from 6.1% in April. The drop was in part due to more jobs created and 53,000 people dropping out of the labor force. The jobless rate has been understated by people misclassifying themselves as being “employed but absent from work.” Without this problem, the unemployment rate would have been 6.1%.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell to 61.6% from 61.7% in April.

“It appears like employers may need to offer up more incentives to entice workers to fill the record number of job openings that are out there,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

U.S. consumer prices post biggest gain in nearly 12 years as inflation pressures build

By Lucia Mutikani

WASHINGTON (Reuters) -U.S. consumer prices increased by the most in nearly 12 years in April as booming demand amid a reopening economy pushed against supply constraints, which could fuel financial market fears of a lengthy period of higher inflation.

The report from the Labor Department on Wednesday also showed a strong building up of underlying price pressures. Demand is being driven by nearly $6 trillion in government relief since the COVID-19 pandemic started in the United States in March 2020 and the vaccination of more than a third of the population.

Federal Reserve Chair Jerome Powell and many economists largely view higher inflation as transitory, with supply chains expected to adapt and become more efficient. But there are concerns that inflation could linger amid reports that companies are raising wages as they compete for scarce workers.

Though job openings are at a record 8.1 million and nearly 10 million people are officially unemployed, companies are scrambling for labor. Generous unemployment benefits, fears of contracting COVID-19, parents still at home caring for children and pandemic-related retirements have been blamed for the disconnect. Average hourly earnings jumped in April.

The consumer price index jumped 0.8% last month, the largest gain since June 2009. The CPI rose 0.6% in March. Food prices increased 0.4%. The cost of food consumed at home also gained 0.4%. The cost of food consumed away from home rose 0.3%. Gasoline prices fell 1.4% after accelerating 9.1% in March.

Economists polled by Reuters had forecast the CPI climbing 0.2% in April.

In the 12 months through April, the CPI shot up 4.2%. That was the largest gain since September 2008 and followed a 2.6% increase in March. The jump mostly reflected the dropping of last spring’s weak readings from the calculation.

Those so-called base effects are expected to push annual inflation even higher in the months ahead.

U.S. stock index futures extended losses on the data, which investors feared could force the Fed to raise interest rates sooner than expected. The dollar rose against a basket of currencies. U.S. Treasury prices were lower.

The Fed slashed its benchmark overnight interest rate to near zero and is pumping money into the economy through monthly bond purchases. The U.S. central bank has signaled it could tolerate higher inflation after years of lower inflation.

Excluding the volatile food and energy components, the CPI soared 0.9%, the largest gain since April 1982. The so-called core CPI rose 0.3% in March. There were increases in prices for used cars and trucks, shelter, airline fares, recreation, motor vehicle insurance as well as household furnishings.

In the 12 months through April, the core CPI jumped 3.0% after increasing 1.6% in March.

The Fed tracks the core personal consumption expenditures (PCE) price index for its 2% inflation target, a flexible average. The core PCE price index is at 1.8%.

(Reporting by Lucia Mutikani; Editing by Andrew Heavens and Andrea Ricci)

U.S. job growth far below expectations in April amid labor shortages

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. employers hired far fewer workers than expected in April, likely frustrated by labor shortages, leaving them scrambling to meet booming demand as the economy reopens amid rapidly improving public health and massive financial help from the government.

Nonfarm payrolls increased by only 266,000 jobs last month after rising by 770,000 in March, the Labor Department said in its closely watched employment report on Friday.

Economists polled by Reuters had forecast payrolls advancing by 978,000 jobs.

The jobs report, the first since the White House’s $1.9 trillion COVID-19 pandemic rescue package was approved in March, will probably do little to change expectations that the economy entered the second quarter with strong momentum and was on track for its best performance this year in almost four decades.

Twelve months ago, the economy purged a record 20.679 million jobs as it reeled from mandatory closures of nonessential businesses to slow the first wave of COVID-19 infections. New claims for unemployment benefits have dropped below 500,000 for the first-time since the pandemic started.

Americans over the age of 16 are now eligible to receive the COVID-19 vaccine, leading states like New York, New Jersey and Connecticut to lift most of their coronavirus capacity restrictions on businesses.

But the resulting burst in demand, which contributed to the economy’s 6.4% annualized growth pace in the first quarter, the second-fastest since the third quarter of 2003, has triggered shortages of labor and raw materials.

From manufacturing to restaurants, employers are scrambling for workers. A range of factors, including parents still at home caring for children, coronavirus-related retirements and generous unemployment checks, are blamed for the labor shortages. The moderate pace of hiring could last at least until September when the enhanced unemployment benefits run out.

The labor market remains supported by very accommodative fiscal and monetary policy. President Joe Biden plans to spend another $4 trillion on education and childcare, middle- and low-income families, infrastructure and jobs. The Federal Reserve has signaled it intends to leave its benchmark interest rate near zero and continue to pump money into the economy through bond purchases for a while.

The unemployment rate rose to 6.1% in April from 6.0% in March. The jobless rate has been understated by people misclassifying themselves as being “employed but absent from work.” Millions of Americans remain out of work and many have permanently lost jobs because of the pandemic.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)

U.S. consumer prices post biggest gain in 8-1/2 years as economy reopens

By Lucia Mutikani

WASHINGTON (Reuters) -U.S. consumer prices rose by the most in more than 8-1/2 years in March as increased vaccinations and massive fiscal stimulus unleashed pent-up demand, kicking off what most economists expect will be a brief period of higher inflation.

The report from the Labor Department on Tuesday also showed a firming in underlying prices last month as the broader reopening of the economy bumps against bottlenecks in the supply chain, capacity constraints and higher commodity prices.

Federal Reserve Chair Jerome Powell and many economists view higher inflation as transitory, with supply chains expected to adapt and become more efficient. The supply constraints mostly reflect a shift in demand towards goods and away from services during the pandemic, now in its second year.

“Inflation is a process and not a one-time event,” said Chris Low, chief economist at FHN Financial in New York. “These bottlenecks are one offs. The Fed will not consider action until it views price levels changes as permanent rather than temporary, something it does not consider possible until the economy is at full employment.”

The consumer price index jumped 0.6% last month, the largest gain since August 2012, after rising 0.4% in February. A 9.1% surge in gasoline prices accounted for nearly half of the increase in the CPI. Gasoline prices rose 6.4% in February.

Food prices edged up 0.1%. The cost of food consumed at and away from home also rose 0.1%.

Economists polled by Reuters had forecast the CPI advancing 0.5%. In the 12 months through March, the CPI surged 2.6%. That was the largest gain since August 2018 and followed a 1.7% increase in February.

The jump mostly reflected the dropping of last spring’s weak readings from the calculation. Those so-called base effects are expected to push up annual inflation even higher in the coming months before subsiding later this year.

Stocks on Wall Street were mostly higher. The dollar slipped against a basket of currencies. U.S. Treasury prices rose slightly.

UNDERLYING INFLATION FIRMING

Excluding the volatile food and energy components, the CPI increased 0.3% after nudging up 0.1% in February. The largest gain in seven months in the so-called core CPI was driven by a rise in rents as well as hotel and motel accommodation prices, which rebounded 4.4% after falling 2.7% in February.

The cost of hospital services increased 0.6%. But prescription medication prices were unchanged leading to overall healthcare costs edging up 0.1%. Used cars and trucks prices increased a solid 0.5%, but the cost new cars was unchanged for a second straight month. Motor vehicle production has been hampered by a global shortage of semiconductors.

Consumers also paid more for motor vehicle insurance as well as recreation and household furnishings. But apparel prices fell as did costs related to education.

The core CPI increased 1.6% on a year-on-year basis after rising 1.3% in February. The Fed tracks the core personal consumption expenditures (PCE) price index for its 2% inflation target, a flexible average. The core PCE price index is at 1.5%.

The cost of services advanced 0.4% after rising 0.3% in February. The government reported last week that producer prices surged in March. With the CPI and PPI data in hand, economists at JPMorgan forecast the core PCE price index gained 0.4% in March after nudging up 0.1% in February. That would lift the year-on-year increase to 1.9% from 1.4% in February.

March’s strong inflation readings are in sync with several business surveys showing an acceleration in cost pressures.

Manufacturers are grappling with acute shortages of basic materials, rising commodities prices and difficulties in transporting finished goods.

Some economists argue the fractured supply chains, together with nearly $6 trillion in government relief since the COVID-19 pandemic barreled through the United States in March 2020 could fan inflation for a sustained period. The Fed has also slashed its benchmark overnight interest rate to near zero and is pumping money into the economy through monthly bond purchases.

These economists also point to the business surveys, which have indicated that customer inventories are at record lows and order books are full. A survey from the NFIB on Tuesday showed just over a third of small businesses planned raising prices in March, noting that “low inventories and solid sales will create more opportunities to raise prices.”

“This suggests companies have strong pricing power that could allow them to expand profit margins after several years of margin compression, which could keep inflation higher for longer,” said James Knightley, chief international economist at ING in New York.

But labor market slack could make it harder for inflation to continue spiraling higher. Employment remains 8.4 million below its peak in February 2020. The extremely accommodative fiscal and monetary policy are also unlikely to keep inflation uncomfortably high, if history is a good predictor.

“Neither rapid money growth and record federal budget deficits have had any correlation with inflation over the past 40 years,” said David Berson, chief economist at Nationwide in Columbus, Ohio. “Additionally, the factors that have acted to keep inflation in check in recent decades – stable inflation expectations, increased use of technology, production movements to low-cost areas – all remain in place.”

(Reporting by Lucia Mutikani, Editing by Andrea Ricci)

U.S. weekly jobless claims unexpectedly rise, but labor market improving

By Lucia Mutikani

WASHINGTON (Reuters) -The number of Americans filing new claims for unemployment benefits unexpectedly rose last week, but the increase likely understated the rapidly improving labor market conditions as more parts of the economy reopen and fiscal stimulus kicks in.

The second straight weekly increase in claims reported by the Labor Department on Thursday was at odds with reports this month showing the economy created 916,000 jobs in March, the most in seven months, and job openings increased to a two-year high in February.

“Our belief is that continued moves to reopen the economy will result in a solid further advance in payrolls in the April jobs report and that the claims data are likely not capturing the pace of improvement in the labor market,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

Initial claims for state unemployment benefits increased 16,000 to a seasonally adjusted 744,000 for the week ended April 3 compared to 728,000 in the prior week. Data for the prior week was revised to show 9,000 more applications received than previously reported.

Economists polled by Reuters had forecast 680,000 applications for the latest week. Though claims have dropped from a record 6.149 million in early April of 2020, they remain more than double their pre-pandemic level. In a healthy labor market, claims are normally in a range of 200,000 to 250,000.

Part of the elevation in claims is because of fraud, multiple filings and backlogs following the enhancement of the unemployment benefit programs.

The government is paying a weekly $300 unemployment supplement, as well as funding benefits for the self-employed, gig workers and others who do not qualify for the regular state unemployment insurance programs.

The weekly subsidy and the Pandemic Unemployment Assistance (PUA) program will run through Sept. 6.

Including the PUA program, 892,539 people filed claims last week, remaining below one million for a third straight week.

The increase in applications was led by California and New York. There were big drops in Alabama and Texas, as well as Ohio, which has been beset by fraudulent applications.

“The total number of filings for all unemployment insurance programs has remained stubbornly steady over the last few months despite net re-hiring in monthly employment reports,” said Veronica Clark, an economist at Citigroup in New York.

“This could partly be a reflection of more workers wanting to stay on unemployment benefits even if some return to work part-time given the greater size of payments.”

U.S. stocks opened largely higher. The dollar fell against a basket of currencies. U.S. Treasury prices gained.

COMPANIES HIRING

The labor market has regained its footing after stumbling in December, thanks to the White House’s massive $1.9 trillion pandemic rescue package and an acceleration in the pace of COVID-19 vaccinations, which are allowing more services businesses to resume operations.

In the minutes of the Federal Reserve’s March 16-17 policy meeting released on Wednesday, U.S. central bank officials acknowledged the improvement in labor market conditions and “expected strong job gains to continue over coming months and into the medium term.”

Several Fed officials suggested the latest relief package “could hasten the recovery, which could help limit longer-term damage in labor markets caused by the pandemic.”

Anecdotal evidence suggests companies are recalling workers laid off during the pandemic and hiring new employees. An Institute for Supply Management survey on Monday showed services businesses reporting they “have recalled everyone put on waivers and made new hires” and had “additional employees added to service the needs of new customers at new locations.”

Still, the labor market recovery has a long way to go. Employment is 8.4 million jobs below its peak in February 2020.

The claims report also showed the number of people receiving benefits after an initial week of aid decreased 16,000 to 3.734 million in the week ended March 27. That was the lowest reading since March 2020 when mandatory closures of non-essential businesses were being enforced across many states to slow the first wave of COVID-19 infections.

The 12th straight weekly decline in the so-called continuing claims in likely due to people finding work and exhausting their eligibility for benefits, limited to 26 weeks in most states. About 5.634 million people were on extended benefits during the week ended March 20, up 117,108 from the prior week.

Another 786,962 were on a state program for those who have exhausted their initial six months of aid, down 230,780 from the week before. There were 18.2 million receiving benefits under all programs during the week ended March 20.

(Reporting by Lucia MutikaniEditing by Chizu Nomiyama and Paul Simao)

Rise in U.S. weekly jobless claims belies improving labor market conditions

By Lucia Mutikani

WASHINGTON (Reuters) -The number of Americans filing new claims for unemployment benefits unexpectedly rose last week, though the labor market recovery is gaining traction as economic activity picks up, driven by increased vaccinations and massive fiscal stimulus.

That was confirmed by other data on Thursday showing a measure of manufacturing activity soared to its strongest level in more than 37 years in March, with employment at factories the highest since February 2018. Layoffs announced by U.S. companies in March were also the fewest in more than 2-1/2 years.

Initial claims have been distorted by backlogs, multiple filings and fraud, making it difficult to get a clear signal on the labor market’s health from the weekly data.

“Higher jobless claims in the most recent week don’t detract from the strong downward trend, which will continue given the reopening of local and state economies, and the acceleration of vaccinations,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia.

Initial claims for state unemployment benefits jumped 61,000 to a seasonally adjusted 719,000 for the week ended March 27, the Labor Department said.

Data for the prior week was revised to show 26,000 fewer applications received than previously reported, pushing total filings down to 658,000 and below their 665,000 peak during the 2007-09 Great Recession. In a healthy labor market, claims are normally in a 200,000 to 250,000 range.

The government revised the claims data from 2016, which showed applications hitting a record 6.149 million in April 2020, instead of 6.867 million in March 2020.

A staggering 79 million claims were filed under the regular state (UI) programs since mid-March 2020 when mandatory closures of non-essential businesses such as restaurants, bars and gyms were being enforced across many states to slow the first wave of COVID-19 infections.

About 28 more million applications were submitted under the government-funded Pandemic Unemployment Assistance (PAU) program, which covers the self-employed, gig workers and others who do not qualify for the UI programs.

“Together, that equates to 70% of payrolls, or 67% of household employment, pre-pandemic and reflects duplicate filings and fraud,” said Sarah House, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

“But also the tremendous churn in the labor market since COVID, with some workers losing jobs more than once as restrictions and activity fluctuated this past year.”

Economists polled by Reuters had forecast 680,000 applications in the latest week. Virginia accounted for the bulk of the rise. There were also notable increases in California, Georgia, Kentucky, New Jersey and New York.

Including the PUA program, 951,458 people filed claims last week, remaining below one million for a second straight week.

U.S. stocks were higher. The dollar slipped against a basket of currencies. U.S. Treasury prices rose.

MANUFACTURING SHINES

Both the economy and the labor market appear to have turned the corner after hitting a ditch in December, thanks to the acceleration in inoculations, which is allowing more businesses to reopen. The White House’s massive $1.9 trillion pandemic relief package is sending additional $1,400 checks to qualified households and extending the government safety net for the unemployed through Sept. 6.

In a separate report on Thursday, the Institute for Supply Management (ISM) said its index of national factory activity jumped to a reading of 64.7 last month from 60.8 in February. That was the highest level since December 1983.

A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists had forecast the index rising to 61.3 in March. The survey’s manufacturing employment gauge shot up to its the highest reading since February 2018.

According to the ISM, “significantly more companies are hiring or attempting to hire than those reducing labor forces.”

Indeed, a third report from global outplacement firm Challenger, Gray & Christmas showed planned layoffs by U.S.-based companies dropped 11% to 30,603 in March, the fewest since July 2018. Through the first quarter planned layoffs plunged 35%, compared the October-December period. At 144,686, job cuts last quarter were the fewest since the fourth quarter of 2019.

The labor market’s improving fortunes were underscored by a survey from The Conference Board this week showing its measure of household employment rebounding in March after three straight monthly decreases. That aligns with expectations that the government’s closely watched employment report on Friday will show a surge in job growth in March.

According to a Reuters survey of economists, nonfarm payrolls likely increased by 647,000 jobs last month after rising by 379,000 in February. That would leave employment about 8.8 million below its peak in February 2020, highlighting that a full labor market recovery is years away.

At least 18.2 million people were collecting unemployment checks in mid-March, a sign that long-term joblessness was becoming entrenched.

“But even at that rapid (hiring) clip, it would take the economy until January 2024 to get back to pre-pandemic trends,” said Andrew Stettner, senior fellow at The Century Foundation.

“This cold, hard math underscores the hurdles facing the millions of workers still on state or federal jobless aid as they seek to return to productive work.”

(Reporting By Lucia MutikaniEditing by Chizu Nomiyama)

Stocks climb for second day as data eases inflation jitters

By Chuck Mikolajczak

NEW YORK (Reuters) – A gauge of global stocks climbed for a second straight day on Wednesday to hit its highest level in a week, after a report on U.S. consumer prices indicated calmed recent concerns about inflation, while the dollar retreated further from a 3-1/2 month high.

Economic data from the Labor Department said its consumer price index rose 0.4% in February, in-line with expectations, after a 0.3% increase in January. Core CPI, which excludes the volatile food and energy components, edged up 0.1%, just shy of the 0.2% estimate, after being unchanged the prior two months.

“We will see what happens in terms of when inflation begins to pick up over the next couple of years, but the market seemed to like it OK today,” said Ellen Hazen, portfolio manager at F. L. Putnam Investment Management in Wellesley, Massachusetts.

While analysts largely expect a pickup in inflation as vaccine rollouts have led to a reopening of the economy, worries persist that additional stimulus in the form of a $1.9 trillion coronavirus relief package set to be signed by U.S. President Joe Biden could lead to an overheating of the economy and uncontrolled inflation.

“There are a lot of reasons why inflation could pick up over the next two to three years and the market is correct to be concerned about that, it might have gotten a little bit overly focused on it in the last couple of weeks,” said Hazen.

“But in general, the market is correct to be on alert for signs of rising inflation, particularly because of the stimulus and the size of the Fed balance sheet.”

The House of Representatives moved toward final approval of Biden’s $1.9 trillion COVID-19 relief bill on Wednesday, which forecasters predict will turbocharge the U.S. economy.

The data was enough to puncture recent concerns about rapidly rising inflation and provide support for stocks on Wall Street, which built on Tuesday’s strong rally.

The Dow Jones Industrial Average rose 332.58 points, or 1.04%, to 32,165.32, the S&P 500 gained 23.83 points, or 0.61%, to 3,899.27 and the Nasdaq Composite added 58.07 points, or 0.44%, to 13,131.89.

The yield on the benchmark 10-year note retreated in the wake of the data, before edging higher on the session and taking some of the early steam out of equity gains.

Investors will now eye auctions of 10-year and 30-year debt on Wednesday and Thursday, with investors seeking to cover massive shorts on both maturities. A weak 7-year auction in late February helped fuel inflation concerns and sent yields higher.

Benchmark 10-year notes last yielded 1.5438%, from 1.544% late on Tuesday.

The dollar also moved lower for a second day following the data before reversing course.

The dollar index rose 0.022%, with the euro down 0.04% to $1.1893.

Oil prices resumed their climb after two days of declines, extending gains after the Energy Information Administration reported a bigger-than-expected storage build. [nL1N2L81NJ]

U.S. crude recently rose 0.45% to $64.30 per barrel and Brent was at $67.82, up 0.44% on the day.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)

U.S. labor market struggling, but light at the end of tunnel

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new applications for unemployment benefits fell slightly last week as the labor market continued to tread water, but a drop in new COVID-19 cases has raised cautious optimism that momentum could pick up by the spring.

The weekly unemployment claims report from the Labor Department on Thursday, the most timely data on the economy’s health, also highlighted labor market scarring, with over 20 million people collecting unemployment checks in late January.

“Claims remain stuck at painfully high levels,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia. “But we are seeing hopeful signs that claims will begin meaningful declines in the next month or two.”

Initial claims for state unemployment benefits slipped 19,000 to a seasonally adjusted 793,000 for the week ended Feb. 6. Data for the prior week was revised to show 33,000 more claims received than previously reported. Economists polled by Reuters had forecast 757,000 applications for the latest week.

Unadjusted claims decreased 36,534 to 813,145 last week. There were notable jumps in filings in California and Ohio. Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state programs, 1.148 million people filed claims last week.

Claims are stuck in the upper end of their 711,000-842,000 band between October and November. They remain above their 665,000 peak during the 2007-2009 Great Recession, though they are below the record 6.867 million reported last March when the pandemic hit the United States.

The labor market recovery has stalled in recent months as the country battled a resurgence in coronavirus infections, which ravaged restaurants and other consumer-facing businesses. The government reported last Friday that the economy created only 49,000 jobs in January after losing 227,000 in December.

Labor market woes strengthen the case for President Joe Biden’s proposed $1.9 trillion recovery package, which is under consideration in the U.S. Congress. The government provided nearly $900 billion in additional pandemic relief in late December. Republican lawmakers are opposing the planned massive fiscal stimulus due to concerns about the swelling national debt.

Stocks on Wall Street were trading higher. The dollar was steady against a basket of currencies. U.S. Treasury prices were mostly lower.

LONG BOUTS OF UNEMPLOYMENT

But there are glimmers of hope on the horizon. Reported new coronavirus cases in the United States dropped 25% last week, the biggest fall since the pandemic hit the nation. Infections have now fallen for four consecutive weeks, according to a Reuters analysis of state and county reports.

Should the trend continue and the distribution of vaccines broaden out, that, together with additional stimulus, could allow more businesses to reopen. There are signs that businesses are testing the waters. Temporary help jobs, a segment normally considered a harbinger of future hiring, jumped in January.

“Temporary and contract jobs are running slightly ahead of where they were the same time a year ago,” said Richard Wahlquist, chief executive officer at the American Staffing Association.

For now, the slack in the labor market remains immense. The claims report showed that people receiving benefits after an initial week of aid fell 145,000 to 4.545 million in the week ended Jan. 30. But the decline in the so-called continuing claims was mostly due to people exhausting their eligibility for benefits, limited to 26 weeks in most states.

At least 4.778 million people were on extended benefits during the week ended Jan. 23, up 1.2 million from the prior period. These benefits, which are funded by the government, will expire in mid-March if Congress does not pass the Biden administration’s relief package.

Another 1.653 million were on a state program for those who have exhausted their initial six months of aid. That meant 6.4 million people have been unemployed for more than six months.

“This is by the far the highest we have seen at any point during this crisis,” said AnnElizabeth Konkel, an economist at Indeed Hiring Lab. “Long-term joblessness is happening right now and is a very real challenge for the recovery.”

About 20.435 million people were receiving benefits under all programs during that period, an increase of 2.6 million from mid-January. The surge partly reflected the extension of government-funded benefits in late December, and underscored the widespread nature of unemployment.

“The unemployed are having a difficult time reentering the labor force, and this highlights the need for additional federal aid,” said Scott Anderson, chief economist at Bank of the West in San Francisco.

The economy has recovered 12.3 million of the 22.2 million jobs lost during the pandemic. The Congressional Budget Office has estimated employment would not return to its pre-pandemic level before 2024.

(Reporting by Lucia Mutikani; Editing by Paul Simao)