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The number of Americans filing new claims for unemployment benefits fell last week, according to Labor Department data released on Thursday, indicating that the surge in U.S. coronavirus infections to a record level has had no effect on employment.
Initial claims for state unemployment benefits fell to a seasonally adjusted 198,000 for the week ending Dec. 25 from a revised 206,000 the previous week. Early this month, claims fell to a level not seen since 1969. Reuters polled economists, who predicted 208,000 applications for the most recent week. Claims have fallen from a high of 6.149 million in early April of 2020. Applications typically rise during the winter months, but a severe labor shortage has disrupted that seasonal pattern, resulting in lower seasonally adjusted claims numbers in recent weeks. When weekly volatility is factored out, the labor market is tightening, with the unemployment rate at a 21-month low of 4.2 percent.
At the end of October, there were a record 11.0 million job openings. Wages are rising as companies compete for scarce workers, which is supporting consumer spending. In the third quarter, the economy grew at a 2.3 percent annualized rate, with consumer spending increasing at a 2.0 percent annualized rate. Forecasted growth for the fourth quarter is as high as 7.2 percent. According to a Reuters survey of economists, the economy is expected to grow 5.6 percent in 2021, the fastest rate since 1984. In 2020, the economy will contract by 3.4 percent.
Questions are now being raised about how long that momentum will last, with Omicron’s rapid spread pushing COVID-19 infections back to record highs, surpassing even last winter’s crashing wave. Furthermore, the Biden administration’s $1.75 trillion domestic investment plan has been stalled in the United States Senate.