While unemployment remains high compared to pre-pandemic levels, the number of first-time jobless claims are decreasing. Claims were down in the first week of the new year, hinting at a slow but steady recovery in the weeks and months to come.
Improvement in the employment market will be of benefit to all Americans, and investors will find confidence in the steadily improving numbers.
State Jobless Claims Take Unexpected Dip
First-time claims for state unemployment benefits were reported at 787,000 in the most recent weekly report, down from 790,000 in the last week of 2020. Analysts had predicted that the figure would be as high as 800,000 before official numbers were released.
With a resurgence in Coronavirus infection rates, economists were worried that the job market would suffer. While the overall recovery has slowed somewhat in recent weeks, the employment market appears to be faring better than expected.
Analysts have warned that the numbers could worsen in the short-term, as companies have been forced to close or reduce their operations due to COVID-19 related restrictions. California, the nation’s most populous and wealthiest state, is facing severe restrictions that will impact commerce.
Even if the jobless claims do increase in the first quarter, they are likely to trend downwards overall in 2021 and 2022. With Coronavirus vaccine approvals already given in the United States, interruptions caused by the pandemic will become less frequent. States expect to roll out millions of vaccines this year, with doses already being administered to healthcare workers, at-risk groups, and first responders.
What Does an Improving Job Market Mean for Investors?
In the long-term, an improving job market should be a boon for investors. With people returning to work, consumer spending is likely to increase. This will boost corporate profits, potentially increasing the value of stocks.
Equities have already shown great resilience in the face of the Pandemic, and a transition of Presidential power later this month has investors optimistic about new federal stimulus measures and policies designed to inject life into the economy.
Indexes ended 2020 on unexpected highs. Good news like the decline in initial jobless claims will only help to prolong what has been one of the most impressive rallies in history.
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