U.S. economy eyes strong 2021 finish as labor market tightens,

WASHINGTON, Nov 24 (Reuters) – The number of Americans filing new claims for unemployment benefits dropped to a 52-year low last week, suggesting economic activity was accelerating as a year ravaged by shortages, high inflation and an unrelenting pandemic draws to a close.

The plunge in claims reported by the Labor Department on Wednesday was, however, exaggerated by difficulties adjusting the data for seasonal fluctuations this time of the year. Still, the labor market is tightening, with jobless rolls shrinking in mid-November to the smallest since March 2020 when the economy was in the grips of the first wave of COVID-19 infections.

The economy’s strengthening tone was confirmed by other data showing strong consumer spending in October as well as business orders for equipment, excluding transportation. The goods trade deficit narrowed sharply last month as exports surged.

But prices remained stubbornly high, with annual inflation jumping by the most in nearly 31 years. The raft of solid reports ahead of Thursday’s Thanksgiving holiday prompted economists to boost their fourth-quarter growth estimates to as high as an 8.6% annualized rate.

“There might be some seasonal adjustment problems, but the handwriting is on the wall and all the anecdotal reports on how companies cannot find the help they need are true,” said Christopher Rupkey, chief economist at FWDBONDS in New York.

“The economy will finish the year with a bang, there is lots to give thanks for.”

Initial claims for state unemployment benefits tumbled 71,000 to a seasonally adjusted 199,000 for the week ended Nov. 20, the lowest level since mid-November 1969.

Economists polled by Reuters had forecast 260,000 applications for the latest week.

Unadjusted claims rose 18,187 to 258,622 last week amid a surge in Virginia, which offset declines in California, Kentucky and Missouri. More volatility is likely over the holiday season.

“The claims series can be noisy and especially choppy around holidays like Thanksgiving when the seasonal factors anticipate large swings in the underlying data,” said Daniel Silver, an economist at JPMorgan in New York. “But even so, initial claims fell by more than a half million over the year through Nov. 20, both before and after seasonal adjustment.”

Claims have declined from a record high of 6.149 million in early April 2020, and are now viewed as consistent with a healthy labor market, though an acute shortage of workers caused by the pandemic is hindering faster job growth.

But there is hope for an expansion of the labor pool. The number of people continuing to receive benefits after an initial week of aid dropped 60,000 to 2.049 million in the week ended Nov. 13, a 20-month low, the claims report showed.

There were…