Scott Sumner comments on the initial claims release: “Why no lay-offs?”:
I’m not going to redraw the graph, but with today’s numbers (308,000 on the 4 week average) we have fallen below the 0.1% level, meaning that fewer than 1/1000ths of Americans now file for unemployment comp each week. That’s not just boom conditions, it’s peak of boom conditions. The only other times this occurred since 1969 (when unemployment was 3.5%) were just a few weeks at the peak of the 2000 tech boom and a few weeks at the peak of the 2006 housing boom. In other words, the puzzle is now even greater than 6 weeks ago, as the unemployment rate is still at recession levels (7.3%.) Something very weird is going on in the labor markets.
I don’t have any good ideas. Perhaps employers are reluctant to add workers for some reason (Obamacare?) and instead work them overtime more. Then when demand falls instead of laying off workers, they cut overtime. But I don’t recall the average workweek numbers being all that unusual.
My hunch is that these new numbers portend further declines in the unemployment rate in the months ahead. Which is also a puzzle given that RGDP growth is about 2% in recent years.
The charts illustrate.
It is notable that layoffs are at record lows (data only begin in December 2000) and hires are ‘timid’.
Further declines in the unemployment rate should hold, even though RGDP growth is low. But that´s mostly due to the continuing drop in the LFPR and a slowly growing labor force.