US growth up in Q1 as fewer file claims for jobless benefits

Washington

US economic growth accelerated in the first quarter and fewer Americans filed new claims for unemployment benefits last week as the labour market recovery from the Covid-19 pandemic gains traction amid a reopening economy.

Thanks to the massive fiscal stimulus, gross domestic product increased at a 6.4 per cent annualised rate last quarter, the government said in its third estimate of growth for the first three months of the year.

That was unrevised from the estimate published last month. The economy grew at a 4.3 per cent rate in the fourth quarter.

Growth this quarter is forecast to be around a 10 per cent rate.

Federal Reserve Chair Jerome Powell told lawmakers on Tuesday that he believed the economy would see strong job creation in the fall.

In addition to the brightening public health situation, trillions of dollars in pandemic relief from the government are also underpinning the economy.

Initial claims for state unemployment benefits fell 7,000 to a seasonally adjusted 411,000 for the week ended June 19, the Labor Department said on Thursday. Applications increased in the prior week for the first time since late April, with economists attributing the rise to volatility in the aftermath of the May 31 Memorial Day holiday.

"Imprecise seasonal factors around Memorial Day holiday weekend likely contributed to the uptick in initial claims, so the rise should prove temporary," economists at Bank of America Securities in New York wrote in a note.

Economists polled by Reuters had forecast 380,000 applications for the latest week. Claims have dropped from a record 6.149 million in early April 2020.

They, however, remain above the 200,000-250,000 range that is viewed as consistent with a healthy labour market.

At least 150 million Americans have been fully vaccinated against the coronavirus, allowing the economy to begin reopening.

But millions of workers remain at home, frustrating employers who are desperately seeking help to meet surging demand as people leave their homes after being cooped up for more than a year.

There are a record 9.8 million job openings. A shortage of childcare facilities is keeping some parents, mostly women, outside the labour force.

Generous government-funded unemployment benefits, including a US$300 weekly cheque, have also been blamed, as well as a hesitancy to return to work out of fear of contracting the virus.

Pandemic-related retirements and transitions into new careers are also factors. REUTERS