The number of Americans filing first-time claims for unemployment benefits rose last week but remained at the critical 200,000 threshold, the Labor Department reported on Thursday.
The number was above forecasts of 180,000 and 19,000 above the prior week’s revised level.
The four-week moving average was 188,000, an increase of 8.000 from the prior week.
The report comes after payroll firm ADP reported on Wednesday that employers added only 247,000 workers in April, far below the 390,000 forecast. And it comes one day before the government will issue its monthly jobs report. While forecasts are for a gain of 390,000, Wells Fargo on Wednesday lowered its projection from 400,000 to 300,000 following some weaker economic data.
Michael Stull, senior vice president North America at ManpowerGroup, says “employers are being squeezed right now” between needing to fill positions amid an extraordinarily tight labor market and rising costs that are hitting their profit margins.
The tightness of the job market was seen in Tuesday’s report from the Labor Department that there are now a record 11.5 million available positions to fill, or roughly two workers for every job. That is about twice the level it stood at pre-pandemic.
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“If you look at real wage growth, it’s below inflation,” Stull says. “For employers, it’s moving from a world of three candidates for every job to one where a candidate has three jobs to choose from.”
Federal Reserve Chairman Jerome Powell on Wednesday said the labor market remains tight when he answered questions from reporters following his announcement that the central bank would raise interest rates by 50 basis points, the largest increase since 2000.
Powell also said the Fed would begin trimming its holdings of Treasurys and mortgage-backed securities at a rate of $47.5 billion a month for three months, then $95 billion a month thereafter.
The moves come as the Fed pivots from stabilizing the job market in the wake of the coronavirus pandemic to fighting inflation that is now running at more than 8% annually. The market applauded the hawkish stance taken by Powell, with the Dow Jones Industrial Average gaining more than 900 points after the announcement.
Gene Goldman, chief investment officer and director of research at Cetera Investment Management, says the first-quarter report on gross domestic product showing a drop in economic growth, as well as some signs prices in the goods sector are slowing, gives the Fed some help in fighting inflation.
“He ratcheted down talk of a potential 75 basis points hike,” Goldman says, “and you saw the market reaction.”
Goldman and others believe the economy is strong enough for now to withstand the new round of monetary tightening but much will depend on events out of the Fed’s control, such as the war in Ukraine and global supply chains.