Downward Trend in U.S. Jobless Claims Stalls Out

That uptick was a departure from the recent trend, as claims had fallen for six straight weeks prior to the most recent increase. Claims are down sharply from the depths of the Covid-19-induced downturn during 2020, and are hovering at levels half of what they were in January this year. Weekly claims totals are down more than 40% from the 742,000 total posted the week ended April 3.

While last week’s initial claims were higher than projected and claims overall remain higher than pre-pandemic levels, their downward trajectory, along with a pickup in hiring, a declining unemployment rate and optimistic consumer sentiment, points to gains for the U.S. labor market.

“The overall trend is in the right direction,” said Jordan van Rijn, senior economist at the Credit Union National Association. “Right now, there’s a lot of demand for labor out there and it’s the workers that are a little more in the driver’s seat,” he added.

Employers are reporting increased demand for workers as U.S. Covid-19 cases have declined and more people have received vaccinations. State and local governments have phased out restrictions on business, and Americans have increased activities such as traveling and dining out.

Separate data released Thursday by the Commerce Department also pointed to a strengthening economic recovery. Orders for long-lasting manufactured goods rose 2.3% last month. The department also released updated calculations of U.S. gross domestic product—a broad measure of the economy’s output of goods and services. The update said GDP rose at an annual rate of 6.4% in the first quarter, matching previous estimates.

The pace of jobs growth has lagged behind the broader economic bounceback, which many economists have attributed to a variety of factors that they expect will ease over the summer and into the fall.

Those factors include lingering health and child-care concerns. Republican-controlled states also are withdrawing from federal pandemic programs meant to enhance state unemployment benefits.

Many Republicans say the enhancements—particularly a federal $300 supplement to state benefits—are keeping workers on the sidelines. Democrats say the extra benefits are a key support for families and those out of work during a still-emerging recovery.

Half of U.S. states have said they would end the supplement prior to the scheduled, nationwide expiration in September. Four U.S. states ended it on June 12, with the others to follow in the weeks through early July, according to data compiled by Jefferies.

Nela Richardson, chief economist at payroll-processing firm ADP, said the end of the supplement may prompt more workers to seek out jobs, but that the pace of job creation is still likely to be choppy.

“It’s easy to pretend that everything has just reassembled with the snap of a finger, but those infrastructures that help people work are still being rebuilt,” she said, referring to issues such as child care.

Eliza Forsythe, a labor economist at the University of Illinois at Urbana-Champaign, said the pace of hiring may be less robust than previously anticipated in part because the number of people on temporary layoff has plummeted, compared with earlier in the pandemic.

That would suggest, Dr. Forsythe said, that workers seeking jobs currently are looking for new positions rather than returning to their old jobs.

About 1.82 million unemployed people were on temporary layoff last month, compared to 18.05 million in April 2020, according to Labor Department data.

“We have reallocation happening, where most of the people who are coming back to work are searching for a new employer, potentially changing occupation or industry, so that process is a lot slower,” Dr. Forsythe said.

Competition among employers for new hires is shifting bargaining power to workers, also likely affecting the rate of job creation, said Joseph Brusuelas, chief economist at RSM.

“That may be resulting in a slower-than-expected pace in the improvement because workers can now be a little more picky, a little more choosy about where they want to work.”

Write to Amara Omeokwe at [email protected]

Corrections & Amplifications
The four-week moving average for initial jobless claims in the week ended June 19 was 397,750. An earlier version of this article incorrectly put the figure at 396,250. (Corrected on June 24)