WASHINGTON: The number of Americans filing new claims for jobless benefits increased moderately last week, while unemployment rolls hit a 10-month high towards the end of November, suggesting the labor market was gradually slowing down.
Still, labor market conditions remain tight, keeping the Federal Reserve on course to continue increasing interest rates as it fights inflation. The labor market has remained resilient in the face of growing recession risks, caused by the Fed’s aggressive monetary policy campaign.
“Overall, the labor market remains tight and demand for workers is strong,” said Rubeela Farooqi, chief US economist at High Frequency Economics in White Plains, New York. “But the claims data are suggesting a very gradual shift up in layoffs.”
Initial claims for state unemployment benefits increased 4,000 to a seasonally adjusted 230,000 for the week ended Dec. 3. Last week’s increase was in line with economists’ expectations.
Claims tend to be volatile at the start of the holiday season as companies temporarily close or slow hiring, which can make it hard to get a clear read of the labor market. They shot up to a three-month high a week before the Thanksgiving holiday, only to almost unwind the surge in the following week.
Unadjusted claims jumped 87,113 to 286,436 last week, driven by large increases in California, New York, Georgia and Texas. There were also notable rises in Illinois, Pennsylvania and Washington state.
Though there has been an increase in layoffs in the technology sector, with Twitter, Amazon and Meta, the parent of Facebook, announcing thousands of job cuts in November, that has not significantly shifted labor market dynamics.
US stocks opened little changed. The dollar slipped against a basket of currencies. US Treasury prices fell.
Hoarding workers
The government reported last week that nonfarm payrolls increased by 263,000 jobs in November. Economists say technology firms are right-sizing after over-hiring during the COVID-19 pandemic, noting that small firms remain desperate for workers.
Businesses are also hoarding workers after difficulties finding labor in the aftermath of the COVID-19 pandemic. There were 1.7 job openings for every unemployed person in October.
The Fed wants to slow the labor market to cool inflation and has raised its policy rate by 375 basis points this year from near zero to a 3.75%-4.00% range in the fastest rate-hiking cycle since the 1980s.
Economists expect the Fed will continue tightening monetary policy and lift the policy rate to a level higher than the recently projected 4.6%, where it could stay for sometime.
The claims report also showed the number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 62,000 to 1.671 million in the week ending Nov. 26, the highest since February.
The unemployment rate for people on jobless benefits increased to 1.2%, the highest since March, from 1.1% in the prior week. That suggests it is taking a bit longer for the unemployed to find work.
“This might be a sign of a modest easing in the tightness of the labor market and, if it continues, it would sound a cautionary note on the outlook,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
“However, unemployment claims are difficult to seasonally adjust around Thanksgiving and we should wait to see if continuing claims continue to rise or whether the insured rate falls back modestly in the first week of December as it did in 2020 and 2021.”