New applications for unemployment benefits increased 51,000 last week to 419,000, the Labor Department reported on Thursday.
Thursday’s jobless claims number was higher than forecasters’ expectations of 348,000 new claims. The number is higher than the week before, which featured 368,000 filings.
The numbers come after this month’s release of the June jobs report, which beat expectations with 850,000 new jobs added in June, although the unemployment rate slightly increased from 5.8% to 5.9%.
"The unexpected bump in claims could be noise in the system, but it’s also not hard to see how the rise of the COVID-19 delta variant could add thousands of layoffs to numbers that already are double what they were pre-COVID. We should keep a close watch on COVID-19-related layoffs in this 'fourth wave,'" said Robert Frick, corporate economist at Navy Federal Credit Union.
The delta variant of COVID-19 is also on the rise. The Centers for Disease Control and Prevention said this week that the variant, which is more easily transmissible than other strains, now accounts for 83% of infections. COVID-19 infections are up 195% over the past two weeks, although unvaccinated people comprise the bulk of the newest uptick.
Some economists have also expressed concerns that the labor market is being held back by amped-up federal unemployment benefits. Twenty-six states have opted out of the program early, citing fear that it was incentivizing people, especially those in the leisure and hospitality industry, to stay at home and collect the benefits rather than find work.
Another concern for the recovering economy is that of inflation, which has been steadily increasing as pent-up demand continues and the economy remains flush with federal spending. The Department of Labor announced that consumer prices increased 5.4% for the year ending June, the highest rate of inflation since 2008. The numbers blew past consensus predictions of 4.9%.
Treasury Secretary Janet Yellen recently said that she doesn’t think the higher costs will be permanent but warned it could stick around for a bit.
“I think we will have several more months of rapid inflation,” Yellen said. “So I’m not saying this is a one-month phenomenon, but I think over the medium term, we’ll see inflation decline back toward normal levels. But, of course, we have to keep a careful eye on it.”
Even with the labor market and inflation, some investors are still bullish on future economic growth. Earlier this week, Bill Ackman, founder and CEO of Pershing Square Capital Management, predicted a “massive” economic boom and brushed away worries about the delta variant of COVID-19 turning the economy back around.
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Original Author: Zachary Halaschak
Original Location: Jobless claims rise to 419,000, bolstering labor shortage fears