Tag Archives: labor market

Kellogg to permanently replace striking employees as workers reject new contract

By Praveen Paramasivam

(Reuters) – Kellogg Co said on Tuesday a majority of its U.S. cereal plant workers have voted against a new five-year contract, forcing it to hire permanent replacements as employees extend a strike that started more than two months ago.

Temporary replacements have already been working at the company’s cereal plants in Michigan, Nebraska, Pennsylvania and Tennessee where 1,400 union members went on strike on Oct. 5 as their contracts expired and talks over payment and benefits stalled.

“Interest in the (permanent replacement) roles has been strong at all four plants, as expected. We expect some of the new hires to start with the company very soon,” Kellogg spokesperson Kris Bahner said.

Kellogg also said there was no further bargaining scheduled and it had no plans to meet with the union.

The company said “unrealistic expectations” created by the union meant none of its six offers, including the latest one that was put to vote, which proposed wage increases and allowed all transitional employees with four or more years of service to move to legacy positions, came to fruition.

“They have made a ‘clear path’ – but while it is clear – it is too long and not fair to many,” union member Jeffrey Jens said.

Union members have said the proposed two-tier system, in which transitional employees get lesser pay and benefits compared to longer-tenured workers, would take power away from the union by removing the cap on the number of lower-tier employees.

Several politicians including Bernie Sanders and Elizabeth Warren have backed the union, while many customers have said they are boycotting Kellogg’s products.

Kellogg is among several U.S. firms, including Deere & Co, that has faced worker strikes in recent months as the labor market tightens.

(Reporting by Praveen Paramasivam in Bengaluru; Editing by Arun Koyyur and Shounak Dasgupta)

Inflation worries, pandemic curb U.S. consumer confidence; house prices cooling

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer confidence dropped to a nine-month low in November amid worries about the rising cost of living and pandemic fatigue, but that probably does not change expectations for stronger economic growth this quarter.

The survey from the Conference Board on Tuesday showed consumers less enthusiastic about buying a home and big-ticket items such as motor vehicles and major household appliances over the next six months. But consumers held strong views of the labor market, with the gap between those saying jobs are plentiful versus hard to get widening to a record high.

“This isn’t a cause for concern as the relationship between spending and sentiment is loose, particularly in the short-run,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “The good news is that consumers’ assessment of the labor market improved in November, pointing toward further acceleration in job growth.”

The Conference Board said its consumer confidence index fell to a reading of 109.5 this month, the lowest reading since February, from 111.6 in October. The survey was conducted before the discovery of Omicron, a new COVID-19 variant, that was announced last week by South African scientists.

Economists polled by Reuters had forecast the index falling to 111.0. The measure, which places more emphasis on the labor market, has dropped from a peak of 128.9 in June. The fall was less than that of the University of Michigan’s survey of consumer sentiment, which dropped to a decade low this month.

Data this month have suggested that the economy was accelerating in the fourth quarter, with consumer spending surging in October. But the outlook for next year has been clouded by the Omicron variant, which has since been detected in several countries outside the southern African region.

Not much is known about how contagious or vaccine resistant the Omicron variant is. The Conference Board’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, jumped to a reading of 46.9 this month, the highest on record, from 43.8 in October.

This measure closely correlates to the unemployment rate in the Labor Department’s closely watched employment report.

Combined with declining new claims for unemployment benefits, it raises hopes that job growth accelerated further this month, though a shortage of workers remains a challenge. There were 10.4 million job openings at the end of September.

INFLATION FEARS MOUNT

Consumers’ inflation expectations over the next 12 months surged to 7.6% in November from 7.1% last month. Federal Reserve Chair Jerome Powell told lawmakers on Tuesday that the higher prices were generally related to the pandemic, and warned that the risk of higher inflation had increased.

Stocks on Wall Street were trading lower on Powell’s inflation comments. The dollar rose against a basket of currencies. U.S. Treasury prices were mixed.

Rising inflation is starting to influence consumers’ spending decisions, the Conference Board survey suggested.

Buying intentions for motor vehicles fell as did plans to purchase household appliances, television sets and refrigerators over the next six months. But intentions to buy washing machines and clothes dryers rose.

The survey also showed consumers less inclined to buy a house over the next six months. Slowing demand could help to further cool house price inflation.

A second report on Tuesday showed the S&P CoreLogic Case-Shiller’s 20 metropolitan area home price index rose 19.1% on a year-on-year basis in September after advancing 19.6 %in August.

Signs that house price growth was moderating were evident in a third report from the Federal Housing Finance Agency that showed house prices rose 17.7% in the 12 months through September after powering ahead 18.5% in August.

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

U.S. consumer confidence hits seven-month low; goods trade deficit widens

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer confidence fell to a seven-month low in September as a relentless rise in COVID-19 cases deepened concerns about the economy’s near-term prospects, fitting in with expectations for a slowdown in growth in the third quarter.

The survey from the Conference Board on Tuesday showed consumers less interested in buying a home and big-ticket items such as motor vehicles and major household appliances over the next six months. Consumers were also not as upbeat in their views of the labor market as in the prior month.

Economic activity has cooled in recent months as the boost from pandemic relief money faded and infections flared up, driven by the highly contagious variant of the coronavirus.

“But given that wave seems to be cresting, there’s hope confidence just hit its nadir,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia. “Assuming predictions of Delta dropping hold true, this setback may be a three-month trough during the recovery rally.”

The Conference Board said its consumer confidence index dropped to a reading of 109.3 this month from 115.2 in August. The third straight monthly decline pushed the index to the lowest level since February.

The measure, which places more emphasis on the labor market, has dropped 19.6 points from a peak of 128.9 in June. Economists polled by Reuters had forecast the index nudging up to 114.5.

“These back-to-back declines suggest consumers have grown more cautious and are likely to curtail spending going forward,” said Lynn Franco, senior director of economic indicators at the Conference Board in Washington.

Consumers’ inflation expectations over the next 12 months slipped to 6.5% from 6.7% last month. The Federal Reserve last week projected its key inflation measure at 3.7% this year. That was up from the 3.0% median the U.S. central bank projected back in June. The U.S. central bank has a flexible 2% inflation target.

The Conference Board’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, fell to a reading of 42.5 this month from 44.4 in August.

This measure closely correlates to the unemployment rate in the Labor Department’s closely watched employment report. September’s employment report is due to be released next Friday.

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

HOUSE PRICES SURGE

Fewer households intended to buy long-lasting manufactured goods such as motor vehicles and household appliances like washing machines and clothes dryers this month. That supports expectations for a sharp slowdown in consumer spending this quarter, which will ultimately restrain economic growth.

Gross domestic product growth estimates for the third quarter are mostly below a 5% annualized rate. The economy grew at a 6.6% pace in the second quarter.

Expectations for slower GDP growth were reinforced by a separate report from the Commerce Department on Tuesday showing the goods trade deficit rose 0.9% to $87.6 billion in August as businesses imported more products to replenish inventories. Trade has subtracted from GDP growth for four straight quarters.

Imports of goods climbed 0.8% to $236.6 billion, lifted by consumer goods and industrial supplies. But imports of food, capital goods and motor vehicles fell. Motor vehicle imports were likely weighed down by a global shortage of semiconductors, which is impacting production.

Rising imports offset a 0.7% gain in goods exports to $149.0 billion, supported by industrial supplies and consumer goods. But the nation reported a decline in exports of capital goods, motor vehicles and food products. Exports are increasing as global economies continue to recover from the pandemic.

Some of the increase in imports ended up in warehouses at wholesalers and retailers. Wholesale inventories accelerated 1.2% last month after gaining 0.6% in July. Stocks at retailers edged up 0.1% after increasing 0.4% in July. Retail inventories were held back by a 1.5% tumble in stocks of motor vehicle. The drop, which followed a 0.2% gain in July, reflected shortages related to the scarcity of microchips.

Retail inventories excluding autos, which go into the calculation of GDP, rose 0.6% after advancing 0.5% in the prior month. Business inventories were sharply drawn down in the first half of the year. Last month’s increase should soften the hit to GDP growth from the widening goods trade deficit.

News on the housing market was discouraging, with the Conference Board survey showing less enthusiasm among consumers for home purchases over the next six months amid higher house prices, which are pushing homeownership out of the reach of many.

A third report on Tuesday showed the S&P CoreLogic Case-Shiller national home price index surged a record 19.7% in July from a year ago after accelerating 18.7% in June.

Sustained house price inflation was corroborated by a fourth report from the Federal Housing Finance Agency (FHFA) showing house prices soared a record 19.2% in the 12 months through July. That followed an 18.9% jump in June.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

U.S. consumer confidence falls to 6-month low; house prices post record gains

By Lucia Mutikani

WASHINGTON (Reuters) -U.S. consumer confidence fell to a six-month low in August as concerns about soaring COVID-19 infections and higher inflation dampened the outlook for the economy.

The survey from the Conference Board on Tuesday also showed consumers were less upbeat about the labor market. They were less inclined to buy a home and big-ticket items like motor vehicles and major household appliances over the next six months, supporting the view that consumer spending will cool in the third quarter after two straight quarters of double-digit growth.

Still, more consumers planned to go on vacation, indicating a rotation in spending from goods to services was underway as economic activity continues to normalize following the upheaval caused by the coronavirus pandemic. Increased spending on services, which account for the bulk of economic activity, should keep a floor under consumer spending.

“While the resurgence of COVID-19 and inflation concerns have dampened confidence, it is too soon to conclude this decline will result in consumers significantly curtailing their spending in the months ahead,” said Lynn Franco, senior director of economic indicators at the Conference Board in Washington.

It mirrored the University of Michigan’s survey of consumers, which showed sentiment tumbling in August because of rising prices for goods like food and gasoline, as well as the resurgence in COVID-19 cases that has been driven by the Delta variant of the coronavirus.

The Conference Board’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, slipped to 42.8 this month from 44.1 in July. This measure closely correlates to the unemployment rate in the Labor Department’s closely watched employment report.

Fewer households intended to buy long-lasting manufactured goods such as motor vehicles and household appliances like washing machines and clothes dryers, the survey showed. But the share of consumers planning to go on vacations rose, with most expecting to travel domestically and many intending to fly to their destinations. That should help to offset the drag from reduced spending on goods.

Despite the anticipated slowdown, the foundation for consumer spending remains strong, with households sitting on at least $2.5 trillion in excess savings accumulated during the pandemic. Gross domestic product growth estimates for the third quarter are around a 5% annualized rate. The economy grew at a 6.6% pace in the second quarter.

Stocks on Wall Street were trading mostly lower after recent strong gains. The dollar was largely flat against a basket of currencies. U.S. Treasury prices were lower.

HOME PRICES JUMP

The Conference Board survey also showed less enthusiasm among consumers for home purchases over the next six months amid higher house prices, which are sidelining some first-time buyers from the market.

Demand for housing soared early in the pandemic as Americans sought more spacious accommodations for home offices and home schooling, but supply severely lagged, fueling house price growth. COVID-19 vaccinations have allowed some employers to recall workers to offices. Schools and universities have reopened for in-person learning.

A separate report on Tuesday showed the S&P CoreLogic Case-Shiller national home price index jumped a record 18.6% in June from a year ago after rising 16.8% in May. Economists, however, believe that house price inflation has peaked, with homes becoming less affordable especially for first-time buyers.

“Some early data suggests that the buyer frenzy experienced this spring is tapering, though many buyers still remain in the market,” said Selma Hepp, deputy chief economist at CoreLogic. “Nevertheless, less competition and more for-sale homes suggest we may be seeing the peak of home price acceleration. Going forward, home price growth may ease off but stay in the double digits through year-end.”

A separate report from the Federal Housing Finance Agency (FHFA) showed its house price index rose a record 18.8% in the 12 months through June. House prices surged 17.4% in the second quarter compared to the same period in 2020. FHFA believes house prices peaked in June.

The FHFA index is calculated by using purchase prices of houses financed with mortgages sold to or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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)

Fed officials sift through tea leaves of weak U.S. jobs report

By Howard Schneider and Ann Saphir

WASHINGTON (Reuters) – Federal Reserve officials grappled on Tuesday with April’s surprisingly weak employment growth, maintaining faith in the U.S. economic rebound but acknowledging the pace of the jobs recovery may prove choppier than anticipated.

The United States added 266,000 jobs last month, about a quarter of the gain penciled in by economists, including Fed officials themselves, in what had been anticipated to be the start of a steady run of strong job growth.

The April report instead raised a broad set of questions about the complicated interplay among peoples’ decisions about whether to work during the ongoing coronavirus pandemic, constraints stemming from the lack of child care and closed schools, the slowing pace of COVID-19 vaccinations, global supply bottlenecks for critical goods like semiconductors, and the enhanced federal unemployment benefits that may be encouraging some potential workers to stay home.

In contrast to the low number of jobs created in April, job openings as of the end of March hit a record 8.1 million, narrowing the wedge with the roughly 9.8 million people still unemployed.

“What the data suggests, and what I hear anecdotally, is that labor demand and labor supply are both on the path to recovery but they are recovering at different paces and there may be friction,” Fed Governor Lael Brainard told the Society for Advancing Business Writing and Editing (SABEW).

“There are still concerns over contracting the virus, the need to take public transportation,” she said, while many parents are waiting for schools to reopen.

“I do expect to see good improvement on people wanting to go to work and able to work,” Brainard added. “We are just seeing it in fits and starts,” a fact she said validated the U.S. central bank’s “patient” promise to leave crisis-level interest rates and bond-buying in place until the recovery is more complete.

In separate appearances, Cleveland Fed President Loretta Mester, Philadelphia Fed President Patrick Harker, and San Francisco Fed President Mary Daly laid out similar arguments, and noted that much may hinge on whether larger numbers of Americans get vaccinated so that people overall become more comfortable in close-contact jobs and activities.

‘HARD CHOICES’

The April jobs report has kindled intense debate in Washington about where the recovery stands and whether current federal policy is stifling aspects of it.

The economy is poised for its strongest growth since the early 1980s, jobs boards are bulging with open positions, and the number of new daily coronavirus infections has recently ebbed to levels not seen since the start of the pandemic.

Businesses, even the smaller enterprises that had to be nursed through the pandemic with federal help, now complain those same benefits are allowing workers to stay home.

Brainard, however, noted that about two-thirds of school-age kids were still not back in classrooms on a full-time basis, while only about a quarter of those aged 18 to 64 – the core of the U.S. work force – are fully vaccinated.

The decision by the Biden administration and Congress earlier this year to extend a weekly $300 federal unemployment benefit until September has become a particular point of contention, with Republican governors in several states moving to halt the payments.

Fed officials, however, have largely discounted the impact of the extra payments on workers’ willingness to seek jobs, arguing that it isn’t the benefit as much as health risks and other problems that are at play. At the start of the pandemic, federal benefits were put in place largely so people would not have to venture out to jobs that might expose them to illness and allow them to spread it further.

“It is true that with the extension of the unemployment benefits people are in a financial position so that they can make those hard choices, about whether they feel comfortable reentering or not,” Mester said on Yahoo Finance.

The pace of the labor market rebound has a direct bearing on how the Fed intends to set monetary policy.

In particular, the Fed has said it would not change its current $120 billion in monthly purchases of government securities until there was “substantial further progress” in reaching maximum employment.

Slower job growth pushes that moment further into the future even as concerns increase that the continuing loose monetary policy may fuel inflation, or drive up asset prices that will eventually return to earth.

New consumer price data this week is expected to stoke that debate as prices for staple goods and commodities like lumber for home projects move higher.

Fed officials, however, say they expect the pressure on prices to also ease over time, just as the difficulties in the labor market will be resolved.

“To the extent that supply chain congestion and other reopening frictions are transitory, they are unlikely to generate persistently higher inflation on their own,” Brainard said, noting that some of the very forces that might generate higher prices now – a surge in demand as people get back to normal activity, for example – won’t be repeated.

Government fiscal spending is also expected to fade next year.

“Remaining patient through the transitory surge associated with reopening will help ensure that the underlying economic momentum that will be needed to reach our goals as some current tailwinds shift to headwinds is not curtailed by a premature tightening of financial conditions,” she said.

(Reporting by Howard Schneider and Ann Saphir; Editing by Paul Simao)

What’s up with the labor market? Probably won’t know until the fall

By Ann Saphir and Lucia Mutikani

SAN FRANCISCO/WASHINGTON (Reuters) – The big mystery with the government report Friday that’s expected to show nearly a million jobs gained for a second month in row won’t be why U.S. employers hired so many, but why they didn’t hire more.

As the economy revs up to meet the rapacious demand of tens of millions of newly vaccinated Americans, employers say they can’t fill their yawning need for labor.

Take Alex Washut. In January he mapped out hiring plans for his two breakfast and lunch eateries in Western Massachusetts and figured he’d need to hire 20 new cooks, servers, dishwashers and other staff by May. He’s doubled wages in some cases but has only managed to hire five; most of the time, he said, job candidates never even show for their interviews.

At the same time, the U.S. economy is down more than 8 million jobs since before the pandemic, and Federal Reserve officials say the true unemployment rate is closer to 10% than the 5.8% Friday’s report is expected to show.

What gives? It’s a long list, but here are some of the highlights:

* Enhanced unemployment benefits and other government aid are keeping workers on the sidelines, content to collect a check rather than work for a living.

* Parents – particularly mothers – can’t work because closures or shortened hours at schools and daycare keep them home to watch their kids.

* Would-be workers remain concerned about health risks amid a pandemic still claiming about 700 American lives a day.

* Stock market gains have given some older workers the cushion to retire.

* Some younger workers are finding jobs in new fields, shrinking the labor pool for the industries they left behind.

* Many employers need to fill jobs requiring skills that sidelined workers may not have.

What’s that all add up to? In a nutshell, this: A National Federation of Independent Business survey showed a record 42% of small businesses had job openings they could not fill in March.

Economists say that if employers need workers so badly, they would raise pay. So far that’s not happening. U.S. compensation rose faster than expected in the first quarter, but the boost came mostly from one-time bonuses to financial sector workers, and wasn’t broadly shared.

“The full sentence is ‘I can’t find workers at the wage I am willing to offer.’ Full stop,” ADP chief economist Nela Richardson said. “You can find workers.”

EYES ON SEPTEMBER

Over the next several months analysts will watch intently to see how the labor market adapts to the biggest changes since after World War Two, when millions of soldiers returned home and wartime assembly lines shut down. It may be the end of summer before there’s any real clarity.

“Ultimately as we get into September and we see schools reopening and some decline in unemployment insurance benefits we do expect for a lot of these labor scarcity issues to be alleviated,” Deutsche Bank economist Matthew Luzzetti said.

Or, as Cleveland Fed President Loretta Mester put it on Wednesday, as vaccinations rise and more schools return to in-person learning, “We’ll get to that better equilibrium in the labor market between supply and demand.”

It’s not unusual for it to take time for labor markets upended by a recession to work out kinks.

After the last downturn, Fed surveys showed employers grousing about worker shortages in 2012, when the unemployment rate was above 8%. When compensation began to rise in earnest several years later, workers flooded back to the labor market.

“What we saw was that labor supply generally showed up,” Fed Chair Jerome Powell said last month. “In other words, if you were worried about running out of workers, it seemed like we never did.”

This time, with the economy projected to grow at its fastest pace since 1984, the rebalancing may be quicker. The Fed will be watching what happens with wages, and prices.

BACK TO THE KITCHEN? NOPE

Some workers in industries hard hit by job losses, such as restaurants and retail, have moved sectors entirely, said Bill Spriggs, chief economist with the AFL-CIO and professor at Howard University.

Some people who had low-paying jobs before the pandemic were struggling to cover their bills even before the crisis and may be searching for more financial security, Spriggs said.

Richard Bunce, 33, was working as an executive chef in South Philadelphia when the pandemic hit. His eatery shut for six weeks, reopened for takeout, and then shut again.

Laid off, Bunce said he “decided I needed to do something different.” He went to coding school, graduated in December and had a job offer two weeks later. He’s since had a couple of offers to get back into the restaurant business. “I don’t plan on doing that,” he said.

Bunce’s gain is the restaurant industry’s loss. Washington-based restaurant operator Knead Hospitality is so desperate for workers it is offering hiring bonuses of up to $1,000 for servers, line cooks and bartenders.

Washut, the Massachusetts restaurateur, said he figures to entice people collecting unemployment benefits he would have to set starting hourly pay at $19, up from $15 now. That would mean bumping up wages even higher for existing staff or risk them feeling shortchanged. And to pay for all those raises, he’d have to jack up prices on his $12 plates of Caribbean jerk chicken hash and eggs. “And who will pay $20 for an order of hash?”

Jimmy Nigg, who runs the Monkey Barrel Bar in Denver, is in a similar boat. He often finds himself in the kitchen making $5.95 cheeseburgers or behind the bar serving $6 craft beer because he can’t find staff, though he now offers line cooks nearly $19 an hour.

Still, he’s betting the upward wage pressure is temporary.

By September, he said, people will be willing to take “$15 or $16 because they are so desperate.”

(Additional reporting by Howard Schneider in Washington and Jonnelle Marte in New York; Editing by Dan Burns)

U.S. job openings jump to two-year high in boost to labor market

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job openings rose to a two-year high in February while hiring picked up as strengthening domestic demand amid increased COVID-19 vaccinations and additional pandemic aid from the government boost companies’ needs for more workers.

The Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS report, on Tuesday was the latest indication that the labor market had turned the corner after shedding jobs in December as the nation buckled under a fresh wave of COVID-19 infections and depleted government relief.

“Labor demand should continue to heat up as companies brace for a post-pandemic burst in pent-up demand,” said Lydia Boussour, lead U.S. economist at Oxford Economics in New York.

Job openings, a measure of labor demand, increased 268,000 to 7.4 million as of the last day of February. That was the highest level since January 2019 and pushed job openings 5.1% above their pre-pandemic level.

The second straight monthly rise in vacancies lifted the jobs openings rate to a record 4.9% from 4.7% in January.

There were an additional 233,000 job openings in the health care and social assistance industry. Vacancies in the accommodation and food services sector, one of the industries hardest hit by the pandemic, increased by 104,000 jobs. Arts, entertainment and recreation job openings rose 56,000.

But vacancies decreased in state and local government education as well as educational services and information.

Economists polled by Reuters had forecast job openings would rise to 6.995 million in February. The report followed on the heels of news on Friday that the economy added 916,000 jobs in March, the most in seven months.

The labor market is being boosted by an acceleration in the pace of COVID-19 vaccinations and the White House’s recently passed $1.9 trillion pandemic relief package, which is sending additional $1,400 checks to qualified households and fresh funding for businesses.

Demand for labor could increase further as more services businesses reopen. The U.S. Centers for Disease Control and Prevention said on Friday fully vaccinated people could safely travel at “low risk.”

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.”

STIFF COMPETITION

In February, hiring rose 273,000, the largest gain in nine months, to 5.7 million. That boosted the hiring rate to 4.0% from 3.8% in January. Hiring was led by the accommodation and food services industries, which increased by 220,000 jobs. But hiring decreased in state and local government education.

Hiring still has a long way to go, with employment 8.4 million jobs below its peak in February 2020.

“The labor market continues to improve but remains a long way from what the Federal Reserve would describe as the conditions to restore maximum employment,” said John Ryding, chief economic advisor at Brean Capital in New York.

The U.S. central bank has signaled it would maintain its ultra-easy monetary policy stance for a while to allow complete healing.

With unemployment well above pre-pandemic levels, competition for jobs remains tough. There were 1.4 unemployed people for every open job in February, well above 0.82 on the eve of the first wave of the pandemic lockdowns 12 months ago.

“This means employers will have an easier time hiring, but job seekers still don’t have the bargaining power they did prior to the pandemic,” said Nick Bunker, director of research at Indeed Hiring Lab.

Layoffs increased to 1.8 million from 1.7 million in January amid job cuts in the finance and insurance industry. The layoffs rate was unchanged at 1.2%.

Risks remain to the brightening labor market outlook.

“New strains of the virus and unwillingness to abide by health recommendations could extend the impact of the pandemic on the economy,” said Sophia Koropeckyj, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “In addition, the severity of the downturn, which closed many business, means that many industries will not bounce back immediately.”

The number of people voluntarily quitting their jobs rose to 3.4 million from 3.3 million in January. The quits rate was unchanged at 2.3%.

The quits rate is normally viewed by policymakers and economists as a measure of job market confidence. But the pandemic has forced millions of women to drop out of the labor force mostly because of problems related to child care, with many schools still only offering online learning.

(Reporting by Lucia Mutikani; Editing by 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)

U.S. weekly jobless claims hit one-year low; fourth-quarter GDP revised up

By Lucia Mutikani

WASHINGTON (Reuters) -The number of Americans filing new claims for unemployment benefits dropped to a one-year low last week as economic activity rebounds after weather-related disruptions in February.

But the labor market is not out of the woods yet, with the weekly jobless claims report from the Labor Department on Thursday showing a staggering 18.953 million people were still receiving unemployment checks in early March. It will likely take years for a full recovery from the pandemic’s scarring.

“Things have improved over the last year, but there are still millions of people dealing with real economic pain,” said AnnElizabeth Konkel, economist at Indeed Hiring Lab. “Increased vaccinations are hopefully the beginning of the end.”

Initial claims for state unemployment benefits tumbled 97,000 to a seasonally adjusted 684,000 for the week ended March 20, the lowest level since mid-March. Data for the prior week was revised to show 11,000 more applications received than previously reported.

Economists polled by Reuters had forecast 730,000 applications in the latest week. The decline in claims was led by Ohio, which has been dogged by fraudulent filings. There were also large decreases in California and Illinois.

Claims shot up in the second week of March, likely as backlogs after severe winter storms in Texas and other parts of the densely populated South region were processed.

The deep freeze in the second half of February, which also gripped other parts of the country, depressed retail sales, homebuilding, production at factories, orders and shipments of manufactured goods last month.

Warmer weather, the White House’s $1.9 trillion COVID-19 pandemic rescue package and increased vaccinations are expected to boost activity in March. Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell struck an optimistic note on the economy at an appearance before lawmakers this week.

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

CORPORATE PROFITS FALL

But the massive fiscal stimulus, which extended government-funded unemployment aid, including a $300 weekly supplement, through Sept. 6, could keep claims elevated as some people reapply for benefits. Rampant fraud has also pushed filings higher. Claims surged to a record 6.867 million in March 2020.

Just over a year after the pandemic barreled across the United States, jobless claims remain above 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.

Employment is 9.5 million jobs below its peak in February 2020. Economists say it could take at least two years for the economy to recover all the 22.4 million jobs lost in March and April last year.

It could even take longer for the labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, to rebound significantly. The participation rate is near a 47-year low, with women accounting for the biggest share of dropouts.

The claims report also showed that people receiving benefits after an initial week of aid dropped 264,000 to 3.870 million in the week ended March 13. But the decline in the so-called continuing claims was partly due to people exhausting their eligibility for benefits, limited to 26 weeks in most states.

At least 5.551 million people were on extended benefits during the week ended March 6, up 734,692 from the prior period. Another 1.068 million were on a state program for those who have exhausted their initial six months of aid.

The government also confirmed on Thursday that the economy lost considerable momentum at the end of last year amid a flare- up in new coronavirus infections and delays in providing more fiscal stimulus.

Gross domestic product increased at a 4.3% annualized rate, the Commerce Department said in its third estimate of fourth-quarter GDP growth. That was up from the 4.1% pace reported last month but a sharp deceleration from the record 33.4% rate logged in the third quarter.

Corporate profits were weak last quarter. After-tax profits without inventory valuation and capital consumption adjustment, which correspond to S&P 500 profits, contracted at a 1.7% rate after accelerating at a 36.1% pace in the third quarter. Profits fell 3.3% in 2020 after rising 1.8% in 2019.

But that is all history. The economy is forecast to grow by as much as a 7.5% rate in the first quarter. Growth this year is expected to top 7%. That would be the fastest growth since 1984 and would follow a 3.5% contraction last year, the worst performance in 74 years.

“We believe there is ample room for corporate profits to rise as company revenues pick up markedly and margins remain well supported,” said Lydia Boussour, lead U.S. economist at Oxford Economics in New York. “Improving health conditions, expanding vaccine distribution, and generous fiscal stimulus will form a powerful growth cocktail.”

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