The number of Americans filing new claims for jobless benefits fell last week, showing widespread layoffs remain low despite a surge in tech job cuts raising fears of an impending recession.
The US Department of Labor’s weekly unemployment claims report, released Thursday and giving the most recent data on the health of the economy, suggested the labor market remained tight. That, combined with strong consumer spending, keeps the Federal Reserve on track to continue raising interest rates, albeit at a slower pace amid signs that inflation is starting to ease.
“This speaks to the ongoing tightness in the labor market,” said Robert Frick, business economist at Navy Federal Credit Union in Vienna, Virginia.
Initial claims for state unemployment benefits fell 4,000 to a seasonally adjusted 222,000 for the week ended Nov. 12. Economists polled by Reuters had forecast 225,000 claims for the past week.
There has been a spike in layoffs across the tech sector, with Twitter, Amazon and Facebook’s parent company Meta announcing thousands of job cuts this month. Companies in interest-sensitive sectors like housing and finance are also laying off workers.
The layoffs have so far not been evident in official data. Unadjusted claims fell from 6,101 to 199,603 last week. Claims in California, the epicenter of U.S. tech job cuts, rose by just 302 last week. Sharp declines in claims were reported in Florida, Georgia, Kentucky, Indiana and Texas, offsetting notable increases in Minnesota and North Carolina.
Economists say companies outside the tech and housing sectors are hoarding workers after struggling to find work following the COVID-19 pandemic. With 1.9 job openings for every unemployed person in September, some of the laid-off workers are likely to find new jobs quickly.
Goldman Sachs economists dismissed concerns that tech layoffs signaled a looming recession in a note this week. They argued that tech job openings remained well above pre-pandemic levels, also noting that layoffs in the sector have not historically been a leading indicator of deteriorating economics. entire labor market.
The Fed has raised its key rate several times this year, from near zero to a range of 3.75% to 4%, as it battles to bring inflation back to its 2% target in what became the fastest rate hike cycle since the 1980s.
Financial markets are betting that the Fed will switch to a half-percentage-point rate hike at its Dec. 13-14 policy meeting, according to CME Group’s FedWatch tool.
So far, the economy is weathering the storm of monetary policy tightening, with data on Wednesday showing strong retail sales growth last month. This has led economists to expect the policy rate to rise for a long time, eventually reaching a higher level that will be sustained for some time.
Stocks on Wall Street were trading lower. The dollar appreciated against a basket of currencies. US Treasury prices fell.
The difficulties of the housing market
Claims rose slightly between the October and November survey periods, suggesting another month of strong employment growth. The economy created 261,000 jobs in October.
But the housing market is collapsing under the weight of higher borrowing costs, while manufacturing is slowing. Factory activity in the Mid-Atlantic region declined further in November, according to a Philadelphia Fed report.
A third report from the US Commerce Department showed housing starts fell 4.2% to a seasonally adjusted annual rate of 1.425 million units last month. Housing starts fell 8.8% year on year in October.
Single-family housing starts, which account for the largest share of home construction, fell 6.1% to a rate of 855,000 units, the lowest level since May 2020. Single-family home construction decreased in all four regions.
Housing starts for housing projects of five or more units fell 0.5% to 556,000 units. Multi-family housing construction held up better as soaring mortgage rates forced many potential buyers to stay renting. A key indicator of rents rose the most on an annual basis in October, according to the latest consumer price data.
The 30-year fixed mortgage rate is averaging above 7%, the highest level since 2002, according to data from mortgage finance agency Freddie Mac. A survey conducted on Wednesday showed that confidence among single-family homebuilders fell for an 11th straight month in November.
Permits for future housing fell 2.4% to 1.526 million units in October. Single-family building permits fell 3.6% to 839,000 units, also the lowest level since May 2020. Permits for housing projects with five or more units fell 1.9% to 633 000 units.
The number of single-family homes under construction fell, while the stock of completed homes was at its lowest since January, suggesting that supply will remain tight even if demand slows, which could prevent an outright decline in prices. .
“Rising borrowing costs and hesitant homebuilders could worsen the nationwide housing shortage in the near term if activity cools below 2019 levels,” said Jeffrey Roach, chief economist. at LPL Financial in Charlotte, North Carolina.
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