U.S. Jobless Claims Point to a Healthy Labor Market

By Minghe Hu
Medill Reports

The number of Americans filing for initial unemployment insurance benefits, seasonally adjusted, increased to 233,000 in the week ended Jan. 20 from the revised 216,000 in the prior week, according to the Labor Department.

The four-week moving average of initial claims, a better indication of the recent trend, fell 3,500 to 240,000 from the previous week’s revised average.

4-Week Moving Average of Initial Claims, Source :Labor Department via the Federal Reserve Bank of St.Louis, Jan. 25, 2018
4-Week Moving Average of Initial Claims, Source :Labor Department via the Federal Reserve Bank of St.Louis, Jan. 25, 2018. (Minghe Hu/MEDILL)

“Looking at the four-week moving average for claims, or the recent underlying trend, claims have been generally closer to the 240,000 level, or just a bit higher,” Douglas Porter, the chief economist at BMO Financial Group, wrote in an interview via e-mail. “In essence, most Americans who want a job can now find a job.”

The claims processing in Puerto Rico and the Virgin Islands haven’t returned normal due to Hurricanes Irma and Maria last year.

The unemployment rate was at a 17-year low of 4.1 percent in December.

“We also think that this tightness will begin to more noticeably put upward pressure on wage increases in the coming year,” Porter wrote. “And, yes, we do look for the unemployment rate to fall further to around 3.8 percent by the end of 2018.”

Number of Unemployed Persons Per Job Opening, Jan. 25, 2018.Source: Bureau of Labor Statistics
Number of Unemployed Persons Per Job Opening, Jan. 25, 2018. Source: Bureau of Labor Statistics (Minghe Hu/MEDILL)

The number of unemployed persons per job opening remained at an historic low of 1.1 since November, compared to the ratio’s peak of 6.6 in July 2009 during the recession, according to the Bureau of Labor Statistics.

“The key issue there is that there simply are fewer and fewer available workers at this advanced stage of the business cycle,” wrote Porter.

Continuing claims, the number of people receiving benefits after the first-week claims, decreased 28,000 to 1.94 million in the week ended Jan. 13. The four-week moving average of continuing claims dropped 3,500 to 1.92 million.

“The labor market is not full,” said Ian Dew-Becker, an associate professor of finance in Northwestern University’s Kellogg School of Management. “Companies can find qualified workers if they are willing to raise wages.”