New filings for jobless benefits dropped to the lowest level since 1969 last week as robust labor demand continued to leave businesses with no choice but to hold on to their workers.
The claims fell to 184,000 for the week ending Dec. 4, down from 227,000 in the previous week, according to Labor Department data released on Thursday.
But the data was most likely distorted by seasonal adjustments around the traditional holiday season. That volatility is likely to continue through the holidays, until Presidents’ Day in February.
Still, Thursday’s report was a surprise, beating market expectations of 220,000 by quite a significant margin.
The recent mismatch between labor demand and supply has heightened the labor shortage, giving workers more opportunities to find new jobs that pay much better than the unemployment insurance benefits.
Businesses, which have been struggling to fill job vacancies, have little incentive to let their workers go, while raising wages to retain them.
As a result, our preferred measure for weekly initial jobless claims, the 13-week moving average, has steadily declined to 282,000 since late September, a brief period when new claims increased because of the delta variant and the impact from Hurricane Ida.
The total number of claims from all programs for the week ending Nov. 20 was 1.95 million, down by 350,527 from the previous week, and from 19.58 million a year ago. Every program recorded a decrease, led by the regular state unemployment benefit programs, which dropped sharply by 258,390 in the same week.
The data, even with the volatility, is another sign of a strong labor market that has continued to recover. But there are reasons to remain cautious as the labor market remains a long way from the pre-pandemic normal with millions of workers still on the sidelines.
If anything, improvements in the labor market data like Thursday’s will continue to incrementally add to the case for an interest rate hike as early as June, from a Federal Reserve that has been quite vocal on how data-driven it has been.