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'Businesses Are Concerned About The Job Market': Low Unemployment Claims Point To Tight Market

Labor Department stats show that jobless claims fell by 8,000 to 198,000 on the week ending on Dec. 25.

Amid high demand for labor, it has been a particularly good time to be a worker.  Numbers released by the Labor Department show that jobless claims fell by 8,000 to 198,000 in the week ending on Dec. 25 — when averaged out over four weeks. Such low numbers have not been seen since 1969.

PNC Chief Economist Gus Faucher told TheStreet that these numbers point toward a very tight labor market for business. While the economy is still struggling to make up for the jobs lost during the pandemic, the unemployment numbers indicate that layoffs are becoming sparser.

"Businesses are concerned about the job market," he said. "They're concerned that if they lay people off, they won't be able to hire to replace them."

Jobs Bounce Back

When COVID-19 first came to the U.S. in the spring of 2020, there was fear of widespread unemployment — more than 22 million jobs were cut in March and April 2020 alone and unemployment claims for the first week of April jumped to 6 million.

But while the country is still about 3.9 million jobs short of what was happening pre-pandemic, the situation quickly started to stabilize  — unemployment is now at 4.2%, while anything below 3% is considered full employment.

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Faucher said that, even prior to the pandemic, businesses were still competing for workers in fields such as healthcare. After the pandemic, some workers found they did not want to return to jobs with high risks of transmission such as food service or retail. found that they were struggling to find workers to fill them.

It's Hard to Hire

As employers began to bring back certain jobs, many found that they were struggling to find workers to fill them.

"We see people switching jobs for higher pay elsewhere or for better working conditions," Faucher said. "And for those who do lose their jobs, it is fairly easy to find new ones given the fact that the demand for labor is so strong right now."

As a result, businesses need to make increasingly better pay and benefits to both attract and retain workers. While the situation dubbed as the "Great Resignation" is a positive for those who have struggled in low-paid jobs, analysts predict that it could start to change amid a drawn-out pandemic.

With the highly-contagious omicron variant once again sending infection cases soaring, industries like travel and food can once again see fewer customers and, with it, fewer jobs — according to Faucher, the impact of the variant will start to be seen on the labor market in early 2022.

"In the numbers that we saw today, the omicron variant didn't really show up," Faucher said. "We're going to see some people dropping out of the labor force out of concern of catching the omicron variant but we're also going to see demand for some type of businesses start to decline."