Jobless Claims Hit New Pandemic Low—Number Of Americans Receiving Unemployment Benefits Falls To 1.4 Million

Topline

New jobless claims fell sharply last week to their lowest level during the pandemic, performing better than economists expected as a strong labor market recovery encourages Federal Reserve officials to more aggressively raise interest rates.

Key Facts

Crucial Quote

“The Federal Reserve has a dual mandate to promote employment and stable prices, and the strong labor market is leading the Fed to focus squarely on combating the high inflation rate,” Bankrate analyst Ted Rossman said in emailed comments Thursday. “Fed Chair Jerome Powell recently hinted at a more aggressive pace of rate hikes, and this report fits that narrative, since inflation is a much bigger concern than unemployment right now.”

Key Background

The U.S. economy is on track to recoup the 22 million jobs lost during the pandemic recession by late this year, Moody’s Analytics’ chief economist, Mark Zandi, wrote in a research note earlier this month, pointing out that the milestone would likely not have been achieved until 2026 without the U.S. government’s fiscal stimulus measures. However, the unprecedented level of government spending has also fueled a decades-high surge in inflation, with prices rising 7.9% in the 12 months ending in February, the biggest increase since January 1982. The Fed “needs to move aggressively to keep inflation under control,” St. Louis Fed president James Bullard said Tuesday, though other officials aren’t so sure. “Elevated levels of uncertainty are front-forward in my mind and have tempered my confidence that an extremely aggressive rate path is appropriate today,” Atlanta Fed president Raphael Bostic said in a speech Monday, citing a tight labor market—with high labor demand and low worker supply—as a key driver of uncertainty.

Tangent

The stock market logged a dismal start to the year after the Fed revealed it would move more aggressively than previously expected to hike interest rates in a fight against inflation, with Russia’s invasion of Ukraine only adding to economic uncertainty in recent weeks. “Although financial conditions have only tightened somewhat since the start of the conflict, we see potentially large downside growth risks if tighter sanctions or an escalation in the conflict leads to a broader global slowdown that spills over to the U.S.,” Goldman Sachs chief economist Jan Hatzius wrote in a note to clients. After climbing 27% in 2021, the S&P 500 is down 7% this year.

Further Reading

Fed Official Suggests Central Bank Is Fueling Inflation By Not Raising Rates ‘Aggressively’ (Forbes)

Inflation Spiked 7.9% In February—Hitting 40-Year High Amid Growing Uncertainty Over Record Gas Prices (Forbes)

U.S. Job Growth Surged In February: Economy Added Back 678,000 Jobs As Unemployment Rate Ticked Down To 3.8% (Forbes)