WASHINGTON: The number of Americans filing new claims for unemployment benefits increased less than expected last week, pointing to a still tight labor market, while the economy rebounded faster than previously estimated in the third quarter.
Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 216,000 for the week ended Dec. 17, the Labor Department said on Thursday. Economists polled by Reuters had forecast 222,000 claims for the latest week.
Claims have swung up and down in recent weeks, but have remained below the 270,000 threshold, which economists said would raise a red flag for the labor market. A raft of layoffs in the technology sector and interest-rate sensitive industries like housing have not had a material impact on claims.
Federal Reserve Chair Jerome Powell last week said “it feels like we have a structural labor shortage out there.”
Labor market resilience is keeping the US central bank on its aggressive policy tightening campaign, with the Fed last week projecting at least an additional 75 basis points of increases in borrowing costs by the end of 2023. It has hiked its policy rate by 425 basis points this year from near zero to a 4.25%-4.50% range, the highest since late 2007.
US GDP in Q3 revised up to 3.2%: government
The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of December’s employment report.
Job growth has averaged 392,000 per month this year.
Economists believe that companies are likely to cut back on hiring before embarking on layoffs. Employers have been generally reluctant to lay off workers after struggling to find labor during the COVID-19 pandemic.
The claims report showed the number of people receiving benefits after an initial week of aid fell 6,000 to 1.672 million in the week ending Dec. 10.
The so-called continuing claims, a proxy for hiring, had trended higher since early October. Some economists, however, had argued against reading the steady rise in continuing claims as a sign of easing labor market conditions. They note that most workers preferred not to start a new job during the holiday period and companies also temporarily closed this time.
Labor market strength is helping to underpin the economy by generating solid wage gains, which are contributing to higher consumer spending. A second report from the Commerce Department on Thursday confirmed the economy rebounded in the third quarter after contracting in the first half of the year.
Gross domestic product increased at a 3.2% annualized rate last quarter, the government said in its third estimate of GDP. That was revised up from the 2.9% pace reported last month. The economy had contracted at a 0.6% rate in the second quarter.
Despite mounting recession fears and a housing market slump, growth estimates for the fourth quarter are as high as a 2.7% pace, with consumers doing the heavy lifting, also buttressed by savings accumulated during the pandemic.
Business spending on equipment has also remained resilient despite higher borrowing costs.
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