WASHINGTON, Feb 2 (Reuters) – The number of Americans filing new claims for jobless benefits fell to a nine-month low last week as the labor market remained resilient despite higher borrowing costs and growing fears of a recession this year.
A surprise drop in weekly jobless claims reported by the Labor Department on Thursday raised cautious optimism that the expected decline will be shallow and short. Federal Reserve Chairman Jerome Powell told reporters on Wednesday that “the economy can return to 2 percent inflation without a really significant drop or a really big increase in unemployment.”
“Layoffs remain low and demand for workers remains high,” said Rubella Faruqi, chief U.S. economist at High Frequency Economics in White Plains, New York. “The labor market has yet to respond meaningfully to the rapid increase in interest rates.” Initial claims for state jobless benefits fell 3,000 to a seasonally adjusted 183,000 for the week ended Jan. 28, the lowest level since April 2022. It was the third straight weekly decline in claims. Economists polled by Reuters had forecast 200,000 claims for the final week.
Unadjusted claims fell by 872 last week to 224,356. There were significant declines in filings in Kentucky, California and Ohio, which offset increases in Georgia and New York.
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Claims were low this year, in line with the persistently tight labor market. The government reported on Wednesday that there were 11 million job openings at the end of December, with 1.9 jobs for every unemployed person.
Outside of the technology industry and interest rate-sensitive sectors such as housing and finance, employers have been reluctant to lay off workers after struggling to find labor during the pandemic and also because they are optimistic that economic conditions will improve later this year. years.
A report from the Institute for Supply Management on Wednesday said manufacturers “indicate they will not significantly cut headcount as they are positive about the second half of the year.”
US stocks opened higher. The dollar rose against a basket of currencies. US Treasury yields fell.
TIGHT LABOR MARKET
The US central bank on Wednesday raised the benchmark interest rate by 25 basis points to a range of 4.50%-4.75% and promised a “steady increase” in borrowing costs.
The claims report showed that the number of people receiving benefits after the initial week of unemployment benefits fell by 11,000 to 1.655 million in the week ending Jan. 21. It partially revised the increases recorded in the previous two weeks in the so-called called continuing receivables.
The claims data has no bearing on the January jobs report, which is scheduled for release on Friday, as it is outside the survey period. Nonfarm payrolls likely rose by 185,000 jobs last month, according to a Reuters poll of economists.
The economy created 223,000 jobs in December. The unemployment rate is expected to rise to 3.6% from 3.5% in December.
A large number of layoffs in the technology sector led to job cuts in January. A separate report on Thursday from global outplacement firm Challenger, Gray & Christmas showed layoffs reported by US employers rose 136 percent to 102,943. That was the highest January total since 2009.
The technology sector accounted for 41% of job cuts, with 41,829 layoffs. Retailers announced 13,000 layoffs, while financial firms planned to cut 10,603 jobs.
Despite the tight labor market, wage inflation is slowing and could continue, as the Labor Department’s third report showed worker productivity accelerated at a 3.0% annual rate in the fourth quarter after rising 1.4% in the third quarter .
Productivity fell at a rate of 1.5% from a year ago and will decline by 1.3% in 2022. But that was mostly due to disruption as the economy adjusted to the upheaval caused by the COVID-19 pandemic. Productivity increased by 5.1% compared to the fourth quarter of 2019.
As a result, unit labor costs – the cost of labor per unit of output – rose at a rate of 1.1% after rising 2.0% in the third quarter. Although unit labor costs rose at a rate of 4.5% from a year ago, they were below their peak of 7.0% in the 12 months to the second quarter of 2022.
“The upshot is that, even without the unemployment rate rising and with job creation suspiciously resilient, the labor market no longer looks like a significant source of inflationary pressure,” said Paul Ashworth, chief North American economist at Capital Economics in Toronto. .
Reporting by Lucia Mutikani; Editor Andrea Ricci
Our Standards: Thomson Reuters Trust Principles.
