Jobless Claims Rise Slightly as Omicron Arrives on U.S. Shores

The number of Americans applying for unemployment benefits rose last week even though the U.S. job market has been rebounding from last year’s coronavirus recession. But new concerns are arising from the Omicron variant as it arrives in the U.S.

December 2, 2021 – The Labor Department reported that 222,000 Americans have filed new claims for state unemployment benefits, an increase of 28,000. The previous week’s level was revised down by 5,000 from 199,000 to 194,000. The four-week moving average was 238,750, a decrease of 12,250 from the previous week’s revised average. This is the lowest level for this average since March 14, 2020 when it was 225,500. The previous week’s average was revised down by 1,250 from 252,250 to 251,000.

“Last week’s drop … likely overstated strength, due to holiday-related seasonal adjustment issues,” wrote Rubeela Farooqi, chief economist for High Frequency Economics, in a note. “The overriding message remains the same: Demand for labor remains strong amid a worker shortage.” Greg Staples, DWS Group head of fixed income, Americas, said the timeline for the labor market to reach stability and return back to its pre-pandemic conditions is “the real wildcard” for the economic recovery.

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“Right now, there’re a lot of question as to what it’s going to take in terms of wages, to bring workers back into the workforce,” Mr. Staples said. “There’s been hesitation whether it’s because they’ve got built up savings or they’re worried about child care or they’re worried about COVID. But ultimately, as employers have to raise wages up above say that magic $15 an hour level, it will entice workers back in, will get a more natural equilibrium between employers and employees. Wages will stabilize and some of those inflationary pressures will recede.”

“While the backdrop of uncertainty regarding omicron definitely isn’t helping the market, we’re getting some relatively positive news on the labor market front,” said Mike Loewengart, managing director at E*Trade Financial. “That said, these numbers are backward-looking, so with the new variant coming to light only in the past week, it remains to be seen how it could play a role in effecting the workforce and our economic recovery at large.”

“Workers are in high demand and businesses are reluctant to reduce their workforce amid persisting shortages,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “Our base case was that supply (of workers) would gradually return as the cushion from savings diminished. However, renewed health concerns are a downside risk that may prevent people from returning to the workforce over coming months.”

Pandemic Unemployment Assistance Benefits

During the week, 42 states reported 170,300 continued weekly claims for Pandemic Unemployment Assistance benefits and 42 states reported 146,449 continued claims for Pandemic Emergency Unemployment Compensation benefits. The highest insured unemployment rates were in Puerto Rico (3.7), District of Columbia (3.5), the Virgin Islands (3.3), Alaska (2.8), California (2.7), New Jersey (2.4), Hawaii (2.3), Illinois (2.3), Nevada (2.0), and Pennsylvania (2.0). The largest increases in initial claims were in Virginia (+12,703), New Jersey (+2,061), Michigan (+1,926), Oklahoma (+1,490), and Minnesota (+1,465), while the largest decreases were in California (-7,233), Kentucky (-3,910), District of Columbia (-1,679), Missouri (-1,519), and Massachusetts (-1,410).

The Labor Department’s next monthly jobs report for November will provide more details about the state of the labor market recovery, labor force participation and wage growth. According to Yahoo Finance, consensus economists expect to see that non-farm payrolls grew by 546,000 in November, compared to October’s 531,000 gain. The unemployment rate likely ticked down to 4.5 percent while average hourly earnings likely rose by 5.0 percent over last year to accelerate from October’s 4.9 percent year-on-year rise.

Related: Major Paradigm Shifts Coming Out of the Coronavirus Crisis

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media

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