Jobless claims rise unexpectedly on increases in California and Virginia, but labor market recovery not derailed

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September 23, 2021 — US initial jobless claims for the week ended Sept. 18 rose by 16,000 to a total of 351,000, according to seasonally adjusted data released today by the US Department of Labor. The previous week’s level was revised upward by 3,000.

Two states accounted for the biggest share of the increase, according to unadjusted data. Filings increased by 24,221 in California, which is experiencing a severe wildfire season; and by 12,879 in Virginia, which was affected by Hurricane Ida.

Economists polled by Reuters had forecast 320,000 applications for the latest week. Reuters reported the underlying trend remained consistent with a steadily recovering labor market.

The second straight weekly increase in jobless claims puzzled economists. Some blamed the wildfires in California, while others blamed Hurricane Ida, which devastated US offshore energy production in late August. There was little conviction that ongoing Covid-19 infections, driven by the highly contagious Delta variant of the coronavirus, were a factor.

“Some, but not all, of this recent pickup looks related to Hurricane Ida, as filings in Louisiana have been above their pre-storm trend in recent weeks,” said Daniel Silver, an economist at JPMorgan in New York. “But even including any storm-related claims, the recent move up in filings has not looked particularly severe so far, and we don’t think the labor market recovery has been derailed at this point.”

Pandemic-related factors are causing worker shortages, which are constraining hiring, according to Reuters. Fed Chair Jerome Powell told reporters on Wednesday that he anticipated “more rapid gains in employment” as these factors, which include lack of affordable childcare and fears contracting the virus, diminish.

The four-week moving average of claims edged downward by 750 in the week ended Sept. 18 to a total of 335,750; however, the previous week’s average was revised upward by 750.

Pandemic Unemployment Assistance initial claims, which are not seasonally adjusted, fell by 7,875 to a total of 15,162. The PUA program includes self-employed workers.

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