The number of Americans filing new claims for unemployment benefits fell more than expected last week, while layoffs plunged to a 21-year low in June, suggesting the labor market recovery from the COVID-19 pandemic was gaining traction.
But a shortage of willing workers is hampering hiring, with other data on Thursday showing a measure of employment at factories contracting in June for the first time in seven months. Manufacturers said they were experiencing “difficulty in hiring and retaining direct labor,” the Institute for Supply Management (ISM) said in its survey of national factory activity, noting that these challenges “across the entire value chain continue to be the major obstacles to increasing growth.”
One respondent in primary metals said “lack of labor is killing us.”
The data was released ahead of Friday’s closely watched employment report for June, which according to a Reuters survey of economists will likely show nonfarm payrolls increasing by 700,000 jobs last month after rising by 559,000 in May. The unemployment rate is forecast to tick down to 5.7% from 5.8%.
The economy is experiencing a boom in demand following a reopening made possible by vaccinations against the coronavirus, with more than 150 million Americans fully immunized.
“America’s back to work and an important milestone was reached where new claims are back below the 400,000 barrier after a hiccup at the start of June,” said Chris Rupkey, chief economist at FWDBONDS in New York. “Summer is always the strongest season for hiring each year, and this year is no exception.”
Initial claims for state unemployment benefits dropped 51,000 to a seasonally adjusted 364,000 for the week ended June 26, the Labor Department said. That was the lowest number since March 2020, when mandatory shutdowns of nonessential businesses were enforced to slow the first wave of COVID-19 infections.
The improvement in claims had appeared to stall in mid-June. Though claims remain above the 200,000-250,000 range that is viewed as consistent with a healthy labor market, they have tumbled from a record 6.149 million in early April 2020.
