The U.S. labor market is performing well. Initial claims for unemployment insurance benefits remain at a historically low level. New seasonally adjusted (SA), filings for unemployment insurance benefits fell by 15,000 to 233,000 for the week ending July 15th, while the four week moving average was 243,750. On a non-seasonally (NSA), adjusted basis, new claims fell by 28,000 to 258,500.
Unemployment insurance claims are a count of recipients by state of benefits mandated by federal law. Initial claims for unemployment benefits provide a proxy for layoffs, whereas continuing claims give a timely sense of the stock of unemployed workers.
Continuing claims rose 28,000 week on week (w/w), to 1.98 million for the week ended July 8th. The insured unemployment rate remained unchanged at 1.4%. Continuing claims have now been below 2 million for 12 straight weeks, which results in less labor market slack. This week was the 124th consecutive week that new filings were below the 300,000 threshold, (the threshold associated with a strong labor market). Nine states and Puerto Rico reported an increase in not seasonally adjusted new filings in excess of 1,000 in the week ended July 8th. Several of these states noted layoffs in manufacturing jobs. Figure 1 presents a view of initial claims (SA and NSA), for unemployment insurance benefits from 2013 to present. Initial weekly claims were down 61% since the recession ended July 2009.
Figure 2 charts the same data (SA only), from 2009 to present and includes color coding which depicts where we are on the economic spectrum. We are now solidly in the “green zone” which means sustained economic growth according to the Department of Labor.
Referencing the Job Openings and Turnover Survey (JOLT), report from the Bureau of Labor Statistics (BLS), job openings decreased to 5.7 million on the last business day of May. Over the month, hires increased to 5.5 million and separations increased to 5.3 million.
The labor market continues to perform well. Job openings remain elevated and have consistently exceeded hiring and layoffs remain especially low. Average monthly payroll gains are expected to fall below 100,000 by the end of the decade. Construction as well as transportation and logistics are expected to take an increasing share of jobs while manufacturing, healthcare and finance jobs are anticipated to contract. Moody’s economists expect the labor market will continue tightening through 2019, with the unemployment rate bottoming out near 3.8%. Earnings growth will accelerate as a result, topping out at 3.4% within two years.
At Gerdau, we keep a keen eye on the employment numbers because we have demonstrated that there is an excellent correlation between employment levels and steel consumption. High job creation and low unemployment translate to strong steel demand and vice versa.