An already tight labor market is about to get even tighter. US jobless claims fell to a record low of 166,000 last week. According to the Department of Labor, this is the lowest number recorded since 1968.
Tight Labor Market Tightens Even Further
The US’s tight labor market was further constricted last week. Initial jobless claims fell to their lowest levels since 1968.
The Labor Department reported that initial unemployment filings dropped to a new low of 166,000. This number is 34,000 lower than the Dow Jones estimate of 200,000.
The 166,000 claims are also 5,000 lower than the previous week’s jobless claims. The Labor Department revised its calculations to provide a more accurate picture of the current situation.
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It revised the claims numbers between 2017 to 2021. In addition, it also changed the seasonal factors used to calculate the numbers. As a result, last week’s total was the lowest since November 1968.
Tight Labor Market Leading to A Severe Worker Shortage
The low numbers of new jobless claims suggest a tight labor market about to get even tighter. This can lead to a severe worker shortage in the next few months.
Right now, the US has five million more job openings than there are unemployed workers. This situation is driving up demand, pushing companies to offer higher wages. Consequently, higher wages contribute to rising inflation.
Meanwhile, continuing jobless claims rose to 1.52 million. American workers receiving benefits under all programs shrank to 1.72 million.
In contrast, 18.4 million workers collected unemployment benefits during this same time last year. At that time, the federal government supported jobless Americans with enhanced benefits.
Federal Reserve Raises Interest Rates To Counter Rising Inflation
To counter the effects of inflation, Federal Reserve officials started raising interest rates. The agency hopes to dampen demand by making it more expensive to borrow money.
However, hiring continues to operate at a brisk pace. Despite the economic crunch, nonfarm payrolls increased by 1.7 million during the first quarter of 2022.
Even with the Fed’s initial salvo, inflation continues to rage on. The agency already made clear that it will continue to raise interest rates up to six more times later this year.
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However, minutes from their previous meeting indicated a more aggressive approach. Instead of the anticipated quarter-point increases, the Fed will likely implement half-point interest rate hikes this year.
Inflation Rages On
The inflation rate ballooned to 7.9% in February 2022 compared to year-ago levels. Sharp increases in the prices of food, fuel, and utilities are nullifying any wage increases American lately received.
Experts project the March inflation rate to end at 8.5%. Additional disruptions like the Russia-Ukraine war and the global oil supply crunch are adding more fuel to the fire.
In addition, Federal Reserve policymakers are projecting that inflation will end up at 4.3% through 2022.
Watch the CNBC Television news video reporting that US weekly jobless claims fall well below estimates to 166,000:
What do you think of the tight labor market happening in the US right now? Will the competition to hire workers to lead to bigger wages and more inflation? Or, will current hiring rates keep the US economy afloat?
Let us know what you think. Share your comments below.