New seasonally adjusted jobless claims fell 35,000 to 310,000 according to Labor Department data released Thursday, the same week that the federal unemployment boost of $300 per week expired.
The new claims were at the lowest level since March 14, 2020, which was the first week that shutdowns began to impact the economy. They were less than 100,000 above the 225,500 level registered earlier in March 2020, before COVID-19 reached the level where shutdowns and layoffs began.
About nine million people lost benefits on September 1, when the boosted benefits expired. Congress did not extend the benefits because there have been more than nine million job openings since May, and it seemed that some people were not returning to employment because they were getting as much or more in unemployment benefits.
The extra money being pumped into the economy may also be contributing to inflation, which is the highest it has been in decades.
Millions turned down work during pandemic
As of August 21, nearly 5.1 million Americans were receiving Pandemic Unemployment Assistance for gig and contracted workers, and 3.8 million Americans were receiving the $300 weekly Federal Pandemic Unemployment Compensation, which represented almost 9 million of the 11.9 million Americans receiving some type of unemployment aid that week.
A study in July found that 1.8 million people turned down employment during the pandemic, which is a significant percentage of those who were receiving unemployment during that time. Arguably, some were reluctant to work in public settings before vaccines were widely available, while others had childcare responsibilities for children who could not go to school or day care for a time because they were closed to in-person learning and care.
Still, it only makes sense that people would not be eager to return to the work force just to make less than they did at home. It is never a good idea to pay people not to work.
As millions have continued to collect unemployment, employers are struggling to find workers so they can return to normal operations. Many retail locations still have limited hours compared to before the pandemic, and some entertainment venues like movie theaters have also had to limit their hours or hire younger workers who can only work limited hours.
Wages rising, more inflation?
Wages are also rising because of the scarcity of workers, a trend that is likely to make inflation worse if it continues. Leisure and hospitality wages, which have been traditionally low, have risen 10.3% so far this year, and have contributed significantly to jobs gains in recent months.
“The 5.2% unemployment rate and rapidly rising wages suggest building inflationary pressure that will ultimately lead to more hawkish policy,” Citigroup economist Andrew Hollenhorst said in an analysis of the current situation.
People having more money to spend could lead to spikes in demand for certain products and services, which will lead to price increases in those areas, especially if supply cannot meet demand.
Still, getting people back to work is important if we are every going to have a full economic recovery from the virus, and if that means a little inflation, that’s a price we just may have to pay for a while.