Jobless Claims Hold Near Historic Lows, Showing Labor Market Remains Tight

“Claims as low as they are right now is indicative of a tight labor market, and people aren’t being laid off, they’re quitting” said Joshua Shapiro, an economist at consulting firm Maria Fiorini Ramirez Inc. The rate at which people are quitting jobs has been at record levels in recent months as employers compete for workers by offering better pay and conditions.

Layoffs have been trending lower in recent months, and the rate of workers quitting their jobs has risen as higher inflation prompts employees to seek raises. In the week ended Dec. 4, initial jobless claims fell to 188,000, the lowest weekly level since 1969.

Economists warn, however, that the spread of the Omicron variant of Covid-19 in the U.S. could push layoffs higher in the weeks ahead, particularly in the services sector, as consumers adjust travel and entertainment plans to reduce the risk of getting sick.

Joseph Brusuelas, chief economist at RSM US LLP, expects the labor market will continue to improve, despite the U.S. being “in the early stages of what looks like a modest pullback in consumer behavior as people weigh the risks of sitting next to people in a restaurant or on an airplane.”

Rising Covid-19 cases have caused some Broadway shows to be canceled and basketball and hockey games to be postponed, as well as prompting some colleges to send students home. However, the travel industry is expecting a busy holiday season despite concerns about a looming Omicron surge.

Companies haven’t yet begun to cite the new coronavirus variant as a factor keeping them from hiring, according to David Robb, Grand Rapids, Mich.-based co-owner of the local franchise of Express Employment Professionals, a job-placement agency.

Staffing demand typically ebbs as companies put hiring on hold in the last couple of weeks of the year, he said, but overall demand for workers remains strong.

“2021 has been a record year in terms of the total number of job openings we’re working on,” Mr. Robb said, with lots of companies trying to grow and rebuild from pandemic-related downturns. He said he sees tremendous demand, particularly from manufacturing and logistics companies in his area, continuing for at least the next 12 months.

Jobless claims rose modestly and job creation slowed in the late summer and early fall, coinciding with a rise in cases tied to the virus’s Delta variant, though the economic effects were far less dramatic than when the pandemic first took hold in early 2020. Economists are watching for how the Omicron variant could impact the economy.

“The situation is still very fluid,” said Kathy Bostjancic, an economist at Oxford Economics, adding that the impact of the Omicron variant will become clearer in the weeks ahead. “I do think there’s going to be a possibility of initial jobless claims moving higher,” she said.

Write to Harriet Torry at [email protected]