Weekly jobless claims in the United States have dropped to their lowest level since 1969.

Last seven days, the number of Americans submitting new jobless benefits claims fell to a 52 1/2-year low, while unemployment rolls continued to reject, indicating fast reducing labour market slack that will continue to help wage inflation.

The Federal Reserve may increase interest rates by half a percentage point at its next policy meeting in May, based on the labour market strength reported by the Labor Department on Thursday. On Monday, Fed Chair Jerome Powell said that the US central bank must increase rates “aggressively” and “expeditiously” to save rising inflation from becoming entrenched.

The Federal Reserve bank raised its policy interest rate by 25 basis points last week, the first increase in almost 3 years.

“Business industry in the United States are not laying off people because they are known of the significant hurdles in filling available places,”.

“The Fed will raise a red flag if initial claims remain below 200,000 for an extended period.”

For the week ending March 19, initial claims for state unemployment benefits declined by 28,000 to a seasonally adjusted 187,000, the lowest level since September 1969. Reuters polled economists, who predicted 212,000 applications for the most recent week.

Last week, the drop in claims was widespread, with significant reductions in California, Michigan, Kentucky, and Illinois.

COVID-19 limitations have been relaxed across the country, resulting in a significant reduction in coronavirus cases. They are down from a high of 6.149 million in early April 2020, a new high.

There are no signs that Russia’s war against Ukraine has impacted the labour market. However, it has brought U.S. gasoline prices to record highs and is projected to exacerbate the strain on global supply chains.

However, supply constraints limit business expenditure on equipment. According to a different report released by the Commerce Department on Thursday, orders for non-defence capital goods excluding aircraft, a frequently watched indicator for company spending plans, fell 0.3 percent this month after rising 1.3 percent in January, according to a separate report released by the Commerce Department on Thursday.

According to economists, these so-called core capital goods orders were expected to grow by 0.5 percent.

Core capital goods shipments increased by 0.5 percent in February after expanding by 2.1 percent in January. Core capital goods shipments are utilised to compute equipment spending in the gross domestic product calculation. Economists predict that businesses will continue to invest heavily in equipment this quarter.

“The February declines could signal a shift in businesses’ intentions for [capital expenditures], but the February results could also merely reflect noise in the monthly data,” said Daniel Silver, an economist at JPMorgan in New York. “We believe actual equipment spending will climb strongly in the first quarter, notwithstanding price hikes that will offset some of the nominal gains.”

Stocks in the United States have recovered following a severe dip on Wednesday. The greenback gained ground versus a basket of currencies, and the price of US Treasuries dropped.

a labour shortage

Companies are in severe need of employees. At the end of January, there were 11.3 million job opportunities, with an all-time high of 1.8 vacant positions per unemployed individual.

This discrepancy between labour demand and supply drives wage growth, offering some relief to households from rising gasoline prices while also contributing to high inflation.

According to the claim, the number of people getting benefits after an initial week of assistance fell by 67,000 to 1.350 million in the week ending March 12, the lowest since January 1970. The government surveyed families for the jobless rate in March during the period covered by the so-called continuing claims statistics.

Between the February and March survey periods, people filing new claims dropped dramatically. The jobless rate decreased to a two-year low of 3.8 percent in February.

“These indicators suggest that the March employment situation report will be similar to recent reports, showing solid job growth and continued decreases in the unemployment rate,” said Conrad DeQuadros, senior economic advisor at New York-based Brean Capital.