US labor market remains tight as unemployment hits 10-month high

US labor market remains tight as unemployment hits 10-month high

The number of Americans filing new claims for unemployment benefits increased moderately last week, indicating a still tight and strong labor market despite growing fears of a recession as the US Federal Reserve battles to rein in demand .

Although the US Department of Labor’s weekly jobless claims report on Thursday showed jobless listings, or so-called continuing claims, hitting a 10-month high in late November, economists warned of too much reading of the movement because the data is volatile at this time of the year.

Tensions and resilience in the labor market keep the US central bank on track to continue raising interest rates for some time.

“It is too early to interpret the increase in compensation claims as a signal of a slack in the labor market,” said Isfar Munir, economist at Citigroup in New York. “The holiday period is generally not attractive for workers to start a new job, made worse by the temporary closure of many businesses during the holiday period.”

Initial claims for state unemployment benefits increased by 4,000 to a seasonally adjusted 230,000 for the week ended Dec. 3. Last week’s increase was in line with economists’ expectations. Applications are well below the 270,000 threshold, which economists say would raise a red flag for the labor market.

Demands tend to be volatile at the start of the holiday season as businesses temporarily close or slow hiring, which can make it difficult to get a clear reading of the job market. They hit a three-month high a week before the Thanksgiving holiday, only to nearly ease the surge the following week.

Nonetheless, there has been an increase in layoffs across the tech sector, with Twitter, Amazon and Facebook’s parent company Meta announcing thousands of layoffs in November.

Unadjusted claims jumped from 87,113 to 286,436 last week, led by big increases in California, New York, Georgia and Texas. There were also notable increases in Illinois, Pennsylvania, Indiana, Ohio, New Jersey and Washington State.

The number of people receiving benefits after a first week of help, a proxy indicator of employment, rose by 62,000 to 1.671 million in the week ending Nov. 26, according to claims data. This is the highest level of continuing complaints since February.

The jobless rate for people on jobless benefits rose to 1.2%, the highest since March, from 1.1% the previous week. This suggests that it takes a little longer for the unemployed to find work.

Stocks on Wall Street were trading higher. The dollar depreciated against a basket of currencies. US Treasury yields rose.

“A slight relaxation”

“This could be a sign of a slight easing of labor market tensions and, if it continues, it would be a cautionary tale about the outlook,” said Conrad DeQuadros, senior economic adviser at Brean Capital in New York. .

But DeQuadros also warned that the data was difficult to seasonally adjust around Thanksgiving.

“We should wait to see if continuing claims continue to rise or if the insured rate drops slightly in the first week of December like it did in 2020 and 2021,” he said.

Other economists also took a cautious tone, arguing that adjusting the data for seasonal fluctuations with an alternative model showed a smaller increase than reported by the government.

“This could be particularly important for continuing claims data which shows a clear upward trend in filings in recent months in official numbers, but less noticeable of an increase using some alternate seasonal adjustments,” said Daniel Silver. , an economist at JPMorgan in New York. York.

Despite the recent steady increase in continuing claims, there has been no significant change in labor market dynamics.

The government announced last week that non-farm payrolls increased by 263,000 jobs in November. Economists say tech companies are downsizing after overhiring during the COVID-19 pandemic, noting that small businesses are still in desperate need of workers.

Businesses are also hoarding workers after struggling to find work in the wake of the pandemic. There were 1.7 job openings for every unemployed person in October.

The Fed wants to slow the labor market to calm inflation and has raised its key rate this year from near zero to a range of 3.75% to 4% in the fastest rate hike cycle since the 1980s. .

Economists expect the Fed to continue to tighten monetary policy and raise the key rate above the recently projected 4.6%, where it could stay for some time.

Initial and continuing claims are expected to gradually increase, largely due to white-collar layoffs.

“There will likely be more layoffs among white-collar positions due to labor supply constraints, which are less constraining among white-collar positions,” said Nancy Vanden Houten, chief U.S. economist at Oxford Economics in New York. “Companies are hoarding low-skilled workers because they have been hard to find and retain.”

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