U.S. first-time unemployment claims fell much more than expected last week to reach the lowest level since 1968, with the rate of new layoffs and firings staying low compared to pre-pandemic averages.
The Labor Department released its latest weekly jobless claims report Thursday at 8:30 a.m. ET. Here were the main metrics from the print, compared to consensus estimates compiled by Bloomberg:
Initial jobless claims, week ended April 2: 166,000 vs. 200,000 expected and a revised 171,0000 during prior week
Continuing claims, week ended March 26: 1.523 million vs. 1.302 million expected and a revised 1.506 million during prior week
The number of new claims filed last week marked the least in more than five decades and represented a third consecutive week that new claims were below 200,000. The prior week's new claims were also markedly downwardly revised to 171,000, from the 202,000 previously reported for the end of March. Prior to the pandemic, new claims were averaging around 218,000 per week throughout 2019.
Some of the volatility in the most recent weekly jobless claims data likely reflects a change in the way the Labor Department adjusted the figures to account for seasonal factors. Starting in Thursday's report, the Labor Department returned to using "multiplicative" seasonal adjustment factors for the data. Over the course of the pandemic, the Labor Department had been using "additive" seasonal adjustment factors, which help smooth out large shifts in the data — as had been the case with the anomalous spikes in jobless claims that took place during the early wave of lockdowns in 2020.
"In times of relative economic stability, the multiplicative option is generally preferred over the additive option," the Labor Department said Thursday. "However, in the presence of a large level shift in a time series, multiplicative seasonal adjustment factors can result in systematic over- or under-adjustment of the series; in such cases, additive seasonal adjustment factors are preferred since they tend to track seasonal fluctuations more accurately in the series and have smaller revisions."
Even with the revisions, however, the underlying trend in the data still reflects an incredibly tight labor market, according to many economists.
"The trend is flattening, at an extraordinarily low level," Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in an email Thursday morning.
"The new data show that the downward trend has been steadier since the fading of the Covid Delta wave, but it is now slowing. Claims cannot fall to zero; some firms struggle even at the peak of booms," he added. "Still, the clear message here is that the bar for layoffs is very high, given the extreme tightness of the labor market."
Continuing claims, which track the total number of individuals claiming unemployment benefits across regular state programs, also unexpectedly rose in the latest report following a marked upward revision to the prior week's data. These came in at 1.523 million, rising from the upwardly revised 1.506 million continuing claims from the prior week, which were upwardly revised from the 1.307 million previously reported.
The latest weekly jobless claims data comes on the heels of another solid monthly jobs report from the Labor Department, which showed a significant rise in hirings and a drop in the jobless rate to a near 50-year low. Non-farm payrolls grew by 431,000 in March, while the unemployment rate improved by a greater-than-expected margin to 3.6%. And as of last month, the U.S. labor market was just about 1.6 million payrolls short of its pre-pandemic levels.
"No wonder inflation is out of control, the labor market is at full employment where the costs go up astronomically for companies to bring new workers in to run the factories and work the cash registers across the country," Chris Rupkey, chief economist at FWDBONDS, wrote in a note earlier this week. "The cost of living crisis is aided and abetted by the worst labor shortage that America has ever faced. Waiting for more workers to join the labor force and 'participate' in order to bring down wages and inflation is a pipe dream."
The strong labor market has also emboldened the Federal Reserve to press ahead with more monetary policy tightening, including more aggressive interest rate hikes and balance sheet reduction process starting in the near-term. Earlier this week, Federal Reserve Governor Lael Brainard said it was "of paramount importance" to get inflation down, further reinforcing the central bank was committed to focusing monetary policy efforts on bringing down prices rather than optimizing for further employment growth in an already tight labor market.
"The labor market appears to be moving past the pandemic, rapidly closing in on a complete recovery," Rubeela Farooqi, chief U.S. economist at High Frequency Economics, wrote in a note. "Even as the labor market is tight, suggesting optimism about economic conditions, a four-decade high in prices is tempering expectations."
"Even as consumer balance sheets are healthy and virus concerns are facing, there are downside risks that could weigh on household and economic activity more broadly going forward," she added.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck