The job market in the United States has reached a tipping point more than 20 months into the pandemic.
What’s going on: After seasonal adjustments, weekly jobless claims decreased to 199,000 last week, the lowest level since 1969. In April 2020, they reached a high of 6.15 million.
Is this to say that job circumstances have returned to normal? That’s not the case.
“Although the plunge in [unemployment] claims was certainly welcome, it does not indicate a dramatic turn in the labour market,” PNC chief economist Gus Faucher said in a note to clients. “Claims are highly volatile, especially around holidays.”
The fact that claims are so low could be due to persistent labour market inefficiencies.
“As a result of labour constraints, claims have been moving down,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
Remember that while there is a significant need for workers, the number of persons actively looking for job has decreased. The number of employees who voluntarily leave their jobs reached a new high of 4.4 million in September.
The November jobs data for the United States, which is due this week, will be keenly scrutinised, especially as central bankers consider their next moves.
More good news is expected, according to economists polled by Refinitiv. They expect the economy to add 563,000 jobs in November, up from 531,000 in October.
The unemployment rate is predicted to drop to 4.5 percent by the end of the year. In February 2020, it was 3.5 percent.
This might offer the Federal Reserve more leeway in rolling back stimulus measures while attempting to keep inflation under control without compromising the recovery of jobs.
Goldman Sachs strategists predicted that the Fed would choose to accelerate the rate at which it reduces asset purchases in a research note released Thursday. They expect the Fed to declare in December that it will reduce bond purchases by $30 billion per month beginning in January.