Jobless claims took an unexpected turn higher last week in a potential sign that the wintertime omicron surge was hitting the employment picture.
Initial filings for the week ended Jan. 15 totaled 286,000, well above the Dow Jones estimate of 225,000 and a substantial gain from the previous week’s 231,000.
The total was the highest since the week of Oct. 16, 2021 and marks a reversal after claims just a few weeks ago had hit their lowest level in more than 50 years.
“Omicron has put a wrench in where we stand on the labor market front, but with hiring challenges, employers are likely trying to hold onto their workforce,” said Mike Loewengart, managing director of investment strategy at E*Trade. “So this could be a short-term surge in jobless claims.”
Continuing claims, which run a week behind the headline data, also shot up, rising 84,000 to 1.64 million. One bright spot in the data showed that the four-week moving average for continuing claims, which irons out weekly volatility, declined by 55,250 to 1.664 million, the lowest since the week ended April 27, 2019.
California showed a sharp 6,075 jump in claims while New York reported a slide of 14,011, according to unadjusted data.
Total recipients of all unemployment compensation programs rose by 180,114 to 2.13 million, according to data through Jan. 1.
Jobless claims are seen as a leading real-time gauge of the employment picture, which has brightened in some respects but is still beset by multiple trouble spots.
The unemployment rate has fallen to 3.9% after a record year of nonfarm payrolls growth. Still, the total employment level remains 2.9 million below where it was in February 2020, just prior to the pandemic declaration.
Labor force participation remains well below pre-pandemic levels, with the current 61.9% rate 1.5 percentage points below the pre-Covid level. The labor force has contracted by nearly 2.3 million during the period.
A separate economic report Thursday morning showed that manufacturing activity expanded faster than expected in the Philadelphia area.
The Philadelphia Federal Reserve’s outlook survey registered a reading of 23.2, a measure of the percentage point difference between companies reporting expansion vs. contraction. The estimate had been for 18.5. Just 16% of the companies surveyed said they expect decreases in activity, with gains coming in new orders and future shipments.
The employment index stumbled 19 points to 38.4, but that still reflects expectations of employment growth.
Inflation, however, remains an issue. The future prices paid index surged 23 points to 76.4, its highest level since August 1988.