WASHINGTON, (Reuters) – The US saw a decline in the number of people filing for unemployment benefits last week. This indicates that labor market conditions are tightening further heading into the second quarter. It could also contribute to inflation staying high.

The Labor Department reported that initial claims for state unemployment benefits fell 5,000 to 166,000 in the latest week ending April 2. Reuters polled economists and predicted that there would be 200,000 applicants for the week ending April 2.

In order to eliminate seasonal fluctuations, the government updated claims data between 2017 and 2021. The government stated that the

Seasonally adjusted data was used because of a change in models’ estimations.

The severe shortage in workers keeps layoffs down and boosts hiring. The sharp decrease in COVID-19-related infections is pushing the need for laborers, leading to lifting of restrictions across the country.

The impact of the Russia-Ukraine conflict, which has seen gasoline prices rise to $4/gallon, on the labor market is not yet evident. According to the government, nonfarm payrolls saw a 431,000 job increase in March.

March was the eleventh consecutive month with job gains exceeding 400,000. This lowered the unemployment rate by 2.6%, the lowest level in two years. Only one tenth percent of a percentage points is left in the unemployment rate, which remains at its lowest level since pre-pandemic.

The last day of February saw a record 11.3million job opportunities. High inflation is being caused by the fact that companies are having to increase wages due to the shortage of workers.

The minutes of Wednesday’s Federal Reserve meeting, March 15-16, were published. They showed that policymakers noted that the “demand for labor continues to substantially exceed the available supply across many areas of the economy” and other indicators.

This reflects a tight labor market.”

Last month, the U.S. central banking raised its policy rate by 25 basis point. This was their first increase in over three years. It appeared that Wednesday’s minutes set the scene for substantial rate increases later in the year.