New filings for jobless benefits fell to 166,000 last week—the fewest since 1968—as millions of job vacancies remained unfilled, the Labor Department reported on Thursday.
That marked the tenth week in a row that the headline number for U.S. initial jobless claims stayed below the pre-pandemic average of 218,000. The reading for the week ending March 26 was revised down to 171,000 from 202,000.
Businesses have been struggling to fill vacancies as the labor supply has stagnated during the pandemic. Despite the continuing return of workers to the labor force over the past four months, the imbalance between the demand and supply of labor has persisted amid the increasing mismatch between employers’ needs and employees’ skills.
The Great Resignation has now become the Great Shuffle as workers quit their jobs to move up the career ladder somewhere else with a higher salary or a better working environment. That has left a significant gap for firms that are losing employees and can’t find the workers with the necessary skills to replace them.
Layoffs, therefore, become the last thing that businesses are thinking about in the face of high turnover.
But the labor market will change drastically as fiscal support continues to fade and monetary policy is tightened because of inflation. Labor demand will certainly be the casualty in the Federal Reserve’s fight to tame inflation. But that will take some time.
We expect initial jobless claims to stay relatively low compared to the pre-pandemic level in the second quarter as tightened monetary policies make their way into the market.