WASHINGTON, Feb 2 (Reuters) – The number of Americans filing new claims for unemployment benefits fell to a nine-month low last week as the job market remained resilient despite rising borrowing costs and growing fears of a recession this year.
The surprise drop in weekly jobless claims reported by the Labor Department on Thursday prompted cautious optimism that the economy could ride around a recession or simply experience a superficial, short-lived downturn. Federal Reserve Chairman Jerome Powell told reporters on Wednesday that “the economy can return to 2% inflation without a really significant slowdown or a very large increase in unemployment.”
“One day soon, economists will have to withdraw these calls for a recession in 2023 because the labor market refuses to budge from the lowest unemployment rate in decades,” said Christopher Rupkey, chief economist at FWDBONDS in New York. .
Initial claims for state unemployment benefits fell 3,000 to a seasonally adjusted 183,000 for the week ended Jan. 28, the lowest level since April 2022. It was the third straight weekly drop in claims . Economists polled by Reuters had forecast 200,000 claims for the past week.
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Unadjusted claims slipped from 872 to 224,356 last week. There were notable drops in claims in Kentucky, California and Ohio, which offset increases in Georgia and New York.
Applications have been low this year, reflecting a still tight labor market. The government announced on Wednesday that there were 11 million job vacancies at the end of December, with 1.9 openings for every unemployed person.
“The labor market has yet to respond meaningfully to a rapid rise in interest rates,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.
Outside of the tech industry and interest rate-sensitive sectors like housing and finance, employers have been reluctant to lay off workers after struggling to find work during the pandemic, and also because they are optimistic that economic conditions will improve later this year.
A report from the Institute for Supply Management released on Wednesday said manufacturers “indicate they will not significantly reduce their workforce as they are positive for the second half of the year.”
Stocks on Wall Street were trading higher. The dollar appreciated against a basket of currencies. US Treasury yields fell.
NARROW LABOR MARKET
The U.S. central bank on Wednesday raised its key rate by 25 basis points to the range of 4.50% to 4.75% and promised “continued increases” in borrowing costs.
The claims report showed the number of people receiving benefits after a first week of help, a proxy for employment, fell by 11,000 to 1.655 million in the week ending January 21. This partially revised the increases recorded over the previous two weeks in the so-called continuing claims.
The claims data has no bearing on the January jobs report, due out on Friday, as it falls outside the survey period. Nonfarm payrolls likely increased by 185,000 jobs last month, according to a Reuters poll of economists.
The economy created 223,000 jobs in December. The jobless rate is expected to climb to 3.6% from a 50+ year low of 3.5% in December.
The wave of layoffs in the tech sector pushed up job cuts in January. A separate report released Thursday by global outplacement firm Challenger, Gray & Christmas showed that job cuts announced by US-based employers jumped 136% to 102,943. This is the total of January the highest since 2009.
The tech sector accounted for 41% of job cuts, with 41,829 layoffs. Retailers announced 13,000 job cuts, while financial firms planned to lay off 10,603 workers.
“It’s difficult to fully reconcile the seemingly contrasting messages from the jobless claims data and the Challenger job cuts data,” said Daniel Silver, an economist at JPMorgan in New York. “One possible explanation for the recent discrepancy is that people are being laid off, but not filing for unemployment insurance. This may be because people are easily able to find new jobs or because that severance pay delays eligibility for unemployment benefits.”
Despite the tightening labor market, wage inflation is slowing and could continue to do so as a third report from the Labor Department showed worker productivity accelerating to an annualized rate of 3.0% in the fourth quarter , the fastest in a year, after rising at a 1.4% pace in the third quarter.
Productivity fell at a rate of 1.5% from a year ago and fell 1.3% in 2022. But that was largely due to distortions caused by the COVID-19 pandemic . Productivity increased by 5.1% compared to the fourth quarter of 2019.
As a result, unit labor costs – the price of labor per unit of output – rose at a rate of 1.1%. This is the smallest gain since the first quarter of 2021 and follows a 2.0% pace of growth in the third quarter. Although unit labor costs rose at a rate of 4.5% from a year ago, they were below their peak of 7.0% in the 12 months to the second quarter of 2022.
“The result is that, even with no rise in the unemployment rate and with job offers of suspect resistance, the labor market no longer appears to be a significant source of inflationary pressure,” said Paul Ashworth, chief economist. for North America at Capital Economics in Toronto. .
Reporting by Lucia Mutikani; Editing by Andrea Ricci
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