One critical economic data point that got lost on Thanksgiving eve last week and that bears revisiting was news from the Labor Department that the total number of Americans applying for unemployment sank to the lowest level — in 52 years.
This was a definitive sign that the U.S. job market could be strengthening after the 2020/21 COVID recession. Then, the following day, news about the Omicron variant of COVID-19 took the world by storm, and at one point, the Dow plummeted by more than 1,000 points.
Nevertheless, the surprisingly positive unemployment figure bears taking another look. Jobless claims hit a new low of 199,000, according to data released by the Labor Department last Wednesday morning. The number is officially the lowest since November 1969, and pleasantly surprised economists, who saw the drop as larger than expected.
The figure is also important, since this Friday, the government will release its report on how many Americans are unemployed. The consensus among economists is that it will tick down slightly, to 4.5%, from the current 4.6%.
An Encouraging Sign
Mark Hamrick, senior economic analyst at Bankrate, tells Newsmax Finance that the surprisingly large decline in applications for unemployment benefits is an encouraging sign of a strengthening economy. “It is fair to say that we didn’t see this coming,” Hanrick says. “Getting new claims below the 200,000 level for the first time since the pandemic began is truly significant, portraying further improvement," Hamrick says.
The analyst is optimistic that the jobless claims news is not a random one-off, but a sign that optimism on the jobs front will continue, saying Americans can expect “an already tight job market will continue to tighten in the months ahead. Retail sales have recently surprised to the upside, and that momentum should continue."
The downward momentum on unemployment is evident when compared to the beginning of 2021, when 900,000 applied for unemployment in January, compared to roughly 200,000 now. With this news and the data that 531,000 jobs were added in October, economists see a clear sign that the economy is recovering, despite new concerns over Omicron, record inflation and supply chain issues.
Taking Inflation Data in Stride
As for increasing fears about inflation among Americans, Hamrick predicts rising wholesale and consumer prices will ease to some degree in 2022. Hamrick’s view that is shared by U.S. Treasury Secretary Janet Yellen, who also predicts the inflation crisis will diew down in 2022.
Other analyses, however, point to pervasively high energy prices and predict inflation will worsen in the near future, such as a recent Goldman Sachs report. While many politicians, including Congressman Dean Phillips (D, MN) are likely to tout the record low jobless claims as a win for President Biden, it is important to keep the jobs data in perspective, given that prices outstripping wages is a phenomenon the U.S. economy is wrestling with today.
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