Nearly 3.5 million Americans are still on traditional state unemployment benefits even as the number of Americans seeking new claims fell again last week to a fresh pandemic low, the feds said Thursday.
Continuing claims fell by over 250,000 from 3.8 million the week before, according to data released Thursday by the Labor Department. That figure stood at more than 19.2 million at the same time last year, in the thick of the pandemic.
Continuing claims are at the lowest level since March 21 of last year, the start of the pandemic. But the figure remains about twice as high as before the pandemic.
“Continuing claims are still abnormally elevated but given that job openings are at all-time highs and enhanced unemployment benefits are set to roll off shortly in many states, these numbers should start to improve rapidly into the summer,” Sean Bandazian, investment analyst for Cornerstone Wealth, said.
Initial worker filings for jobless claims, seen as a proxy for layoffs, reached 376,000 last week, down from 385,000 reported the prior week, the feds said.
It’s the sixth consecutive week of steady declines in new claims, but initial claims still remain substantially higher than pre-pandemic levels. The country was averaging just over 200,000 new claims per week in 2019.
The downward trend of new claims is an indication of a labor market that appears to be healing, albeit more slowly than some economists expected earlier this year.
The US added 559,000 jobs last month, fewer than the 671,000 expected by economists, with some hailing the figure as a sign of progress and others saying US hiring continues to disappoint.
That data comes even as US job openings soared to a new record 9.3 million in April, according to data released this week from the Labor Department.
Millions of those Americans on unemployment benefits could also soon see their benefits slashed, as at least 25 states are looking to lure workers back into the labor market by withdrawing from the federal program that provides an extra $300 in unemployment benefits every week.
President Biden confirmed last week that he would let the federal unemployment benefits program expire after Labor Day, but some states will pull out of it as soon as this week.
“Both initial and continuing claims are down but remain at nearly twice the pre-pandemic levels,” said Anu Gaggar, senior global investment analyst for Commonwealth Financial Network. “Most industries are reporting acute labor shortages but that could even out by Fall as the pandemic-era unemployment benefits are phased out and schools reopen allowing parents to return to work.”
Some companies, politicians and economists have said the extra benefits add up to more than what businesses can afford to pay people, particularly for entry-level jobs.
Companies have reported struggles to recruit new workers amid the reopening, with many citing the pandemic-boosted federal unemployment benefits as a cause. Other reasons for the labor crunch include fear of getting COVID-19 and school closures keeping parents at home, economists say.
Some economists have warned that the labor shortage could hold back the US economic recovery, while others have urged patience as businesses grapple with temporary issues in the hiring pool.
The White House has defended the extra benefits, saying that businesses should pay people more.
But many economists are growing increasingly worried about wage inflation driving prices up. Companies have already begun raising prices, blaming higher labor and supply costs.
Chipotle, for example, has raised its menu prices by up to 4 percent to cover the costs of higher wages for employees. Executives from other major companies, including General Mills, Unilever and JM Smucker, have also warned recently about rising costs and inflationary pressures.