Initial jobless claims edged modestly higher to 218,000 for the week ended July 28, in line with expectations. The four-week moving average of jobless claims also fell by 3,500 to 214,500 – a level that remains near its half-century low. Tight labor market conditions are not only supporting a solid pace of job creation, but are making employers think twice about trimming existing payrolls.
Volatility in the claims data can occur at times during the summer months as manufacturers will often shut down for a period, but efforts are made to account for those seasonal effects. Still, both the adjusted and unadjusted claims numbers look very strong. The overall trend is clearly intact, as fewer people are losing their jobs and applying for benefits.
Employers are also finding it increasingly difficult to fill open positions, which is driving the need to entice applicants with higher wages or easier job requirements. That is clear in the continuing claims figures, which also continue to fall, suggesting that those who are out of work are finding it easier to get a job. Continuing claims fell to 1,724,000 – about 12% below a year ago.
Those steps should help to further enhance the likelihood of matching job-seekers with employers looking to hire, but could also create additional costs in terms of compensation and training. It’s good news for the unemployed and workers looking to make a move, but also a sign that the pool of available labor is becoming increasingly tight.
At some point, the tightening of labor conditions will turn negative. Job creation is likely to falter, higher labor costs and challenged productivity would be inflationary, and growth could slow. But for now, the story still looks good for the labor market, for those looking for work, and the prospects for the economy to continue to grow.
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