The number of Americans filing new claims for unemployment benefits fell to a 13-month low last week, suggesting layoffs were subsiding and strengthening expectations for another month of blockbuster job growth in April as a re-opening economy unleashes pent-up demand.
While the labor market recovery is gaining speed, red flags are emerging in the housing market, the economy's star performer during the COVID-19 pandemic. Sales of previously-owned homes tumbled to a seven-month low in March as prices jumped to a record high amid an acute shortage of houses, other data showed on Thursday. Realtors warned that expensive homes could become a permanent feature of the market, worsening inequality.
Even as the economy is booming and the labor market scars are healing thanks to massive public aid from the government and increased COVID-19 vaccinations, there are still 17.4 million people collecting unemployment checks.
"We are seeing claims drop across most states, which shows the jobs recovery has become more geographically broad-based," said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia. "However, a growing number of Americans are out of work for longer, and it's those who are tougher to bring back into the labor force."
Initial claims for state unemployment benefits decreased 39,000 to a seasonally adjusted 547,000 for the week ended April 17, the lowest since mid-March 2020, the Labor Department said.
Economists polled by Reuters had forecast 617,000 applications for the latest week.
It was the second straight week that claims were below the 700,000 level since March 2020 when mandatory shutdowns of non-essential businesses like restaurants and bars were enforced to slow the first wave of COVID-19 infections. There were large declines in filings in Texas and New York, as well as decreases in several other states.
Claims have remained elevated because of fraud, especially in California and Ohio. The enhancement of the unemployment benefits programs, including a weekly $300 subsidy, could also be encouraging some people to attempt to file a claim for assistance, though not every application is approved.
The latest Labor Department data on first payments show only a fraction of claims were successful over the past months.
The weekly subsidy and the Pandemic Unemployment Assistance (PUA) program will run through Sept. 6. Claims jumped to a record 6.149 million in early April 2020. In a healthy labor market, claims are normally in a range of 200,000 to 250,000.
Including the PUA program, 699,798 people filed claims last week, squeaking below 700,000 for the first time since the pandemic started.
Stocks on Wall Street were mixed. The dollar (.DXY) gained versus a basket of currencies. U.S. Treasury prices fell.
The United States has expanded COVID-19 vaccination eligibility to most American adults, and more than half that population has had at least one dose of a vaccine, according to the U.S. Centers for Disease Control and Prevention. A third of U.S. adults are fully vaccinated, as well as 26% of the population overall, it said.
That, together with the White House's $1.9 trillion pandemic rescue package, has allowed for broader economic re-engagement. The resulting surge in demand has left businesses scrambling for workers. Retail sales raced to a record high in March and factories are humming.
Last week's claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of April's employment report. First-time filings have dropped from 765,000 in mid-March, boosting hopes for strong employment gains in April.
The economy created 916,000 jobs in March, the most in seven months. Employment, however, remains 8.4 million jobs below its peak in February 2020.
"Job growth in the spring of 2021 is receiving a boost as better weather allows for more outdoor activity," said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. "Job growth will remain very strong throughout 2021 and into 2022 thanks to vaccination efforts and stimulus payments that are supporting consumer spending."
But the housing market is backpedaling. Existing home sales dropped 3.7% to a seasonally adjusted annual rate of 6.01 million units last month, the lowest level since August 2020, the National Association of Realtors said in a separate report on Thursday. The plunge reflected a supply squeeze, which boosted the median house price a record 17.2% from a year ago to an all-time high of $329,100.
Sales are skewed towards large and more expensive homes. The NAR reported intense bidding wars, which it said could lead to discrimination against some buyers.
“Without an increase in supply, the society wealth division will widen with homeowners enjoying sizable equity gains while renters will struggle to become homeowners,” said Lawrence Yun, chief economist for the NAR.
Still, housing remains supported by the recovering labor market. The claims report showed the number of people receiving benefits after an initial week of aid decreased 34,000 to 3.674 million in the week ended April 10.
The so-called continuing claims have declined from 23.1 million at the height of the crisis. Part of the drop is likely because of people finding work and exhausting their eligibility for benefits, which is limited to 26 weeks in most states.
About 5.6 million people were on extended benefits during the week ended April 3. Another 492,999 were on a state program for those who have exhausted their initial six months of aid. There were 17.405 million people receiving benefits under all programs in early April.
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