New applications for unemployment benefits in the U.S. fell last week to a fresh half-century low as employers held on to their workers in the midst of a labor shortage.

       Initial jobless claims, a proxy for layoffs, decreased by 28,000 to a seasonally adjusted 187,000 last week, the Labor Department said Thursday. That was slightly below a level last seen in December, and the lowest level for initial claims in over 52 years, since September 1969. The four-week average, which smooths out volatility in the numbers, decreased by 11,500 to 211,750.

       Continuing claims, a measure of the total number of people on the unemployment rolls through regular state programs, moved down to 1.35 million for the week ended March 12 from 1.42 million the previous week. That was the lowest level since January 1970, a time when the labor force was roughly half as large as it is today. Continuing claims are reported with a one-week lag.

       “It’s just a reflection of how tight labor markets are," said Nancy Vanden Houten, lead U.S. economist at Oxford Economics. “In an environment where employers are struggling to hire and retain workers, layoffs are going to be at a minimum."

       Roughly half a million fewer people were in the labor force in February than before the pandemic, according to the Labor Department, despite the economy’s rapid recovery. That has left employers struggling to fill open positions.

       In January, the latest month for which data is available, there were nearly 11.3 million open positions, down slightly from December’s record 11.4 million openings.

       By contrast there were only about 6.3 million unemployed people in February, according to the department.

       The fall in new unemployment claims comes at a time when the number of new coronavirus cases is dropping, potentially freeing up more people to get back into the workforce. About 2.8 million people weren’t working in early March because they either had or were caring for someone with Covid-19, down from 7.8 million in late January and early February, according to Census surveys. And the number of people who weren’t working because they were afraid of getting sick fell to 2.3 million from 3 million.

       “That’s a very, very tight labor market, tight to an unhealthy level, I would say," said Federal Reserve Chairman Jerome Powell, speaking to reporters following the Fed’s March 15-16 meeting.

       The Fed raised interest rates by a quarter-percentage point to between 0.25% and 0.5% at that meeting and projected moving its policy rate to close to 2% by the end of the year in an attempt to cool inflation, which has been accelerating at the fastest pace in 40 years.

       Mr. Powell said he believed officials could raise rates while maintaining a vibrant labor market.

       “We feel like the economy can handle tighter monetary policy," he said.

       But a rapid rise in interest rates risks sending the economy into a downturn and harming the labor market, said Joshua Shapiro, chief U.S. economist at MFR, Inc.

       Fed officials “are beginning to realize the hole they’ve dug for themselves and what a difficult tightrope walk it’s going to be to try to squeeze inflation without causing something to crack," he said.

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