Labor Department: Fewest unemployment claims in pandemic era, largest inflation spike in years

The Labor Department released new numbers on unemployment and inflation Thursday. In its weekly report on unemployment claims, the department reported new claims dropped 36,000 to 293,000 last week. In addition to being the second straight week of falling initial claims, “this is the lowest level for initial claims since March 14, 2020,” the department said.

The number of people continuing to receive unemployment aid has also fallen sharply. According to the latest data available, 3.6 million people received some sort of jobless aid in the week ending Sept. 25. That’s down from 4.2 million in the previous week. For perspective, a year ago, nearly 25 million people were receiving benefits.

The low initial unemployment claim numbers come as a bit of a surprise considering Labor Department data released earlier this week showed a record number of people quit in August. This could be explained, at least in part, by some workers quitting to take advantage of higher wages offered by businesses with open positions. Average hourly pay rose at a healthy 4.6 percent in September from a year earlier. For restaurant workers, that number has topped 10 percent.

The rise in wages and drop in initial unemployment claim numbers come amid levels of inflation we are currently seeing for the first time in years. According to another Labor Department report released Thursday, the department’s producer price index has risen 8.6 percent in the last year. That’s the largest year-to-year increase since wholesale prices were first calculated in 2010. It broke the previous record of 8.3 percent set the previous month.

Economists said the jump in wholesale prices is caused by strong demand running up against supply chain problems.

“The demand impact will fade further over coming months,” High Frequency Economics Chief U.S. Economist Rubeela Farooqi said. “But there is a risk of more persistent headwinds from broken supply chains that could keep goods prices and inflation high for longer than expected.”