WASHINGTON (Reuters) – New jobless claims fell to their lowest level in nine months last week. The labor market has held up despite rising borrowing costs and growing fears of a recession this year.
A startling drop in weekly unemployment claims reported by the Labor Department on Thursday sparked cautious optimism that the economy could avoid a recession or experience a shallow and brief recession. Federal Reserve Chairman Jerome Powell told reporters on Wednesday that the economy could return to 2% inflation without a major recession or a large increase in unemployment. .
Christopher Rupkey, chief economist at FWDBONDS in New York, said: “We expect a recession in 2023 as the labor market remains stuck at its lowest unemployment rate in decades. economists will one day have to withdraw.”
First claims for state unemployment benefits fell by 3,000 in the week ending Jan. 28 to a seasonally adjusted 183,000, the lowest level since April 2022. Economists polled by Reuters had predicted 200,000 claims in the most recent week.
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Unreconciled claims fell by 872 last week to 224,356. Kentucky, California and Ohio experienced significant declines in filings, offsetting increases in Georgia and New York.
Claims have been sluggish this year, consistent with continued tightness in the labor market.The government reported Wednesday that there were 11 million job openings at the end of December, with 1.9 all openings unemployed person.
“The labor market hasn’t responded sufficiently to the rapid rise in interest rates yet,” said Rubira Faroochi, chief U.S. economist at High Frequency Economics in White Plains, N.Y.
Outside of the tech industry and interest rate-sensitive sectors such as housing and finance, employers have been reluctant to lay off workers after struggling to find them during the pandemic, and have also reportedly lost their jobs later this year. This is because they are optimistic that economic conditions will improve in the near future.
According to a report by the Institute for Supply Management on Wednesday, the manufacturer “has indicated that it has no intention of significantly reducing its workforce. they are positive About the latter half of this year. ”
Wall Street stocks were trading high. Dollar rose against a basket of currencies. US Treasury yields fell.
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The US central bank on Wednesday Policy interest rate It promised a “continued increase” in borrowing costs, up 25 basis points from 4.50% to 4.75%.
After the first week of assistance, the number of people receiving benefits fell by 11,000 to 1,655,000 in the week of 21 January, according to claims reports. This is called continuous billing.
The claims data fall outside the investigation period and are therefore not relevant to the January employment report due to be released on Friday. A Reuters poll of economists showed he could have gained 185,000 jobs in the nonfarm sector last month.
The economy created 223,000 jobs in December. The unemployment rate rose to his 3.6% in December from 3.5%, which was his lowest in more than 50 years.
A high number of layoffs in the tech sector drove job cuts in January. Job cuts announced by US-based employers surged 136% to 102,943, according to a separate report released Thursday by global outplacement firm Challenger Gray & Christmas. bottom. This was his highest January total since 2009.
The technology sector accounted for 41% of the job cuts, with 41,829 layoffs. The retailer announced his 13,000 job cuts and the financial company was set to lay off his 10,603 employees.
“It’s hard to reconcile the seemingly contrasting messages from the unemployment claims data and the Challenger job cuts data perfectly,” said Danielle Silver, an economist at JPMorgan in New York. “One possible explanation for the recent discrepancy is that people are being laid off but not applying for unemployment insurance. may be delaying eligibility for unemployment benefits.”
Despite a tight labor market, wage inflation has slowed, and a third Labor Department report showed worker productivity hit its highest level in a year in the fourth quarter after rising at a pace of 1.4%. This trend is likely to continue, as it is fast and shows an acceleration of 3.0% per annum. in the third quarter.
Productivity is down 1.5% from a year ago and 1.3% in 2022. But that’s mostly due to the strain caused by his COVID-19 pandemic. Productivity increased 5.1% from Q4 2019.
As a result, unit labor costs (the price of labor per unit of production) rose by 1.1%. This was the smallest increase since the first quarter of 2021 and followed his 2.0% pace of growth in the third quarter. Unit labor costs rose 4.5% year-on-year, but he peaked below 7.0% in the 12 months to Q2 of 2022.
“As a result, even without rising unemployment and questionably resilient job opportunities, the labor market no longer appears to be a significant source of inflationary pressure,” said Paul Ashworth, chief North American economist at Capital Economics. It is.” .
Reported by Lucia Mutikani.Edited by Andrea Ricci
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