MACRO: US jobless claims fall to lowest level since March 2020

Today's report from the US Department of Labored  showed a much larger-than-expected drop in initial unemployment claims last week, bringing the number of those newly unemployed back toward their pre-virus pace. Unemployment claims decreased by 36,000 to 293,000 which is the second straight drop. This is the smallest number of citizens to apply for benefits since the week of March 14, 2020, when the pandemic intensified, and the first time claims have dipped below 300,000. The steady labor market recovery continued amid a rebound in demand for workers and a slowdown in firings, layoffs and separations. Still, there are signs many individuals remain on the sidelines of the labor force due to lingering concerns over the coronavirus, with the level of new claims remaining above the average weekly pace from before the virus in 2019 and September's labor force participation rate holding below its level from February 2020, according to US Department of Labor.

Weekly jobless claims fell sharply last week to the lowest level since the pandemic started. Source: Bloomberg via ZeroHedge

Also the number of US citizens which are receiving benefits under all programs dropped below 4.00 million  for the first time since the pandemic. 

The total number of people receiving some kind of unemployment benefit returned below 4 million. Source: Bloomberg via ZeroHedge

Today's report points out that scarcity of labor was behind slower job growth rather than weakening demand for labor. The labour shortages negatively affect the supply chains because there are fewer workers to produce raw materials and goods which in turn causes inflation to rise.

Another report from the Labor Department showed the producer price index for final demand rose 0.5% in September following 0.7% gain in August. On a yearly basis, the PPI jumped to 8.6%, the largest year-on-year advance since November 2010 when the series was revamped, after increasing 8.3% month earlier.

Now investors need to assess how recent inflationary pressures and supply constraints will affect future business performance.