WASHINGTON, Feb 2 (Reuters) – The number of Americans filing new claims for unemployment benefits fell to a nine-month low last week as the labor market grew, despite higher borrowing costs and fears of a recession this year.
A surprise drop in weekly jobless claims reported by the Labor Department on Thursday raised concerns that the economy may outpace a recession or experience a shallower and shorter recession. Federal Reserve Chairman Jerome Powell told reporters on Wednesday that “the economy could return to 2% inflation without a major recession or a sharp increase in unemployment.”
Christopher Rupkey, chief economist at FWDBONDS in New York, said: “Economists will soon have to lift calls for a recession in 2023 as the labor market refuses to emerge from the lowest unemployment rate in decades.”
Initial claims for state unemployment benefits fell 3,000 to a seasonally adjusted 183,000 for the week ended Jan. 28, the lowest level since April 2022. This was the third straight weekly decline in applications. Economists polled by Reuters had forecast 200,000 claims last week.
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Unadjusted claims slipped by 872 to 224,356 last week. There were significant declines in Kentucky, California, and Ohio, offset by increases in Georgia and New York.
Claims have been low this year, consistent with a persistently tight labor market. There were 11 million job openings at the end of December, the government reported Wednesday, with 1.9 openings for every unemployed person.
“The labor market has not responded meaningfully to faster interest rates,” said Rubella Faruqi, chief U.S. economist at High Frequency Economics in White Plains, New York.
Employers from the technology industry and interest-related issues such as housing and finance have been reluctant to lay off workers after struggling to find labor during the pandemic, and also because they expect economic conditions to improve later this year.
The Institute for Supply Management said Wednesday that producers are “positive in the second half of the year, indicating they will not significantly reduce headcount.”
Stocks on Wall Street were trading high. The dollar has risen against its currencies. US Treasury yields fell.
Tight labor market
The US central bank on Wednesday raised its policy rate by 25 basis points to 4.50%-4.75% and promised “further increases” in borrowing costs.
The claims report showed that after the first week of relief, the number of people receiving benefits fell by 11,000 to 1.655 million as of January 21. It’s called Continuity Claims.
The claim has no bearing on the January jobs report, which is scheduled to be released on Friday, as the data falls outside the survey period. Nonfarm payrolls 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 rose to 3.6% in December from a 50-year low of 3.5%.
A slowdown in the technology sector boosted job cuts in January. On Thursday, a report from international migration firm Challenger, Gray and Christmas showed that job cuts announced by US-based employers rose 136 percent to 102,943. It is the highest January total since 2009.
The technology sector accounted for 41% of the job cuts, with 41,829 layoffs. Retailers announced 13,000 job cuts and financial firms planned to lay off 10,603 workers.
“It’s hard to fully balance the messages from the jobless claims data and the challenging jobs data,” said Daniel Silver, an economist at JPMorgan in New York. “One possible explanation for the recent discrepancy is that people are being laid off but not signing up for unemployment insurance. This could be because people find new jobs more easily or because severance payments delay eligibility for unemployment benefits.”
While the labor market is tight, wage inflation is slowing and likely to continue.The third report from the Labor Department showed that labor productivity grew at a 3.0% annual rate in the fourth quarter, which was the fastest pace of the 1.4% annual increase. In the third quarter.
Productivity is down 1.5% from a year ago and will drop 1.3% in 2022. But this is largely due to disruptions caused by the Covid-19 pandemic. Productivity increased by 5.1% from the fourth quarter of 2019.
As a result, labor costs per unit – the cost of labor per unit of output – increased at a rate of 1.1%. This is the smallest gain since the first quarter of 2021 and follows a 2.0% growth rate in the third quarter. While unit labor costs rose 4.5% from a year ago, they were below the peak of 7.0% in the 12 months to the second quarter of 2022.
Paul Ashworth, chief North American economist at Capital Economics in Toronto, said: “While the growth trend is not likely to increase unemployment and job vacancies remain dubious resilience, the labor market does not appear to be a source of inflation.” .
Reporting by Lucia Mutikani; Editing by Andrea Ricci
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