By Lucia Mutikani; Edited by News Gate Team
REUTERS/Andrew Kelly/File Photo
REUTERS/Andrew Kelly
D.C., February 9 (Reuters) – More Americans than anticipated last week filed new claims for unemployment benefits, but the underlying trend continued to indicate a tight work market.
Despite escalating economic headwinds brought on by the Federal Reserve’s interest rate rises, the labor market has remained resilient. While the U.S. central bank continues to tighten monetary policy due to the labor market’s strength, this does not always mean that a much-anticipated recession is imminent.
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Christopher Rupkey, chief economist at FWDBONDS in New York, stated, “We would be screaming wolf if we said we felt there was a recession signal in the weekly unemployment claims statistics this week.” With layoffs this low, “recession is not around the corner, and the downturn, if it is happening at all, is months away,”
The Labor Department said on Thursday that initial claims for state unemployment benefits increased 13,000 to a seasonally adjusted 196,000 for the week ending February 4. The number of claims increased for the first time since the second last week of December. 190,000 claims were predicted by economists surveyed by Reuters for the most recent week.
The four-week moving average of claims decreased by 2,500 to 189,250, the lowest level since last April, and is seen to be a more accurate indicator of labor market trends because it eliminates the week-to-week variability. Last week, unadjusted claims increased by 9,628 to 234,654.
California had a spike in claims, and Ohio and Illinois also saw significant increases. These increases partially offset declines in Texas, Georgia, and New Jersey.
Despite high-profile layoffs in the IT sector, as well as in the interest rate-sensitive financial and housing industries, claims have remained low. This week, Walt Disney (DIS.N) and Zoom Video Communications (ZM.O) joined their names to the expanding list of businesses that are eliminating jobs by announcing the elimination of 7,000 and 1,300 jobs, respectively.
According to economists, the majority of businesses, particularly those in the technology sector, overhired during the COVID-19 pandemic. They observed that small enterprises were still looking for employees.
Anecdotal information suggests that businesses are often hesitant to fire employees after having trouble filling positions during the pandemic.
Some industries still struggle to find workers. According to figures released by the government last week, there were 1.9 job vacancies for every unemployed person in December. According to a poll released last Friday by the Institute for Supply Management, some service organizations claimed in January that they were “unable to acquire suitable workers” because of a “thin supply.”
US stocks began the day higher. In relation to a currency basket, the dollar decreased. Treasury prices increased.
HEAVY JOB MARKET
The availability of vacancies, on the other hand, made it simpler for laid-off people to obtain work, according to economists who theorized that severance payouts were delaying the filing of unemployment benefit applications.
Gus Faucher, chief economist of PNC Financial in Pittsburgh, Pennsylvania, stated: “If the employer offers severance, the claims are not counted until the severance expires.” The labor market is still incredibly strong, nevertheless,
The government’s approach for removing seasonal changes from data, known as seasonal adjustment factors, was also seen by economists to be preventing higher claims.
At the end of March, the seasonal adjustment variables for 2023 will be revised. Conrad DeQuadros, senior economic advisor at Brean Capital, calculated claims at 210,000 in the most recent week and a four-week average of 200,000 using the average seasonal components for the two years prior with the same calendar configuration as 2023.
However, DeQuadros said that this would still be a low reading on claims and show that either involuntary separations are still at a low level or people who leave their jobs rapidly find new employment. “There is no indication of a loosening of the job market here.”
The claims report also revealed that for the week ending January 28, the number of people getting benefits following a first week of aid—a proxy for hiring—rose 38,000 to 1.688 million.
Strong employment increases have been mostly attributed to lower layoffs. Following a 260,000 increase in December, the government reported last Friday that nonfarm payrolls increased by 517,000 jobs in January, the largest in six months. From 3.5% in December, the jobless rate decreased to 3.4%, a level not seen in more than 53-1/2 years.
In reference to January’s massive employment growth, Fed Chair Jerome Powell stated on Tuesday that the central bank’s battle to control inflation may go “quite a while.” The U.S. central bank has increased its policy rate by 450 basis points since March, moving it from close to zero to a range between 4.50% and 4.75%.
By Lucia Mutikani; Edited by News Gate Team
