Applications for unemployment benefits in the United States fell to their lowest level in 15 weeks as the job market continues to demonstrate resilience despite the Federal Reserve’s efforts to chill the economy.
The number of Americans seeking for unemployment benefits decreased by 1,000 during the week ending January 7, the Labor Department reported on Thursday. The previous week’s total was increased upward by 2,000 to 206,000.
The four-week moving average of claims decreased by 1,750 to 212,500, mitigating some of the week-to-week volatility.
As a proxy for layoffs, unemployment claims have been very low since the pandemic wiped off millions of jobs in the spring of 2020.
Federal Reserve policymakers constantly watch the labor market and hiked interest rates seven times last year in an effort to restrict job growth and reduce stubbornly high inflation.
The government reported last week that companies added 223,000 jobs in December, suggesting that the economy is healthy despite the Fed’s efforts to restrict economic growth and hiring by swiftly increasing interest rates. The unemployment rate reached a 53-year low of 3.5%.
Despite the excellent statistics, the employment report for December hinted that the labor market may be cooling in a way that could benefit the Fed in its fight against high inflation. It was the smallest increase in the past two years, and it extended a slowdown in hiring that began last year. The average hourly wage increased at its slowest rate in sixteen months. This delay could lessen the pressure on firms to boost prices to compensate for rising labor expenses.
Also on Thursday, the government announced that growing consumer prices in the United States slowed further in February, reinforcing expectations that inflation’s hold on the economy will continue to loosen this year, requiring the Federal Reserve to take less harsh action to control it.
The government reported that inflation decreased to 6.5% in December compared to the same month one year prior. It was the sixth consecutive annual decline. Prices actually fell 0.1% from November to December, the first monthly decline since May of 2020.
The Fed’s officials expected slower growth and increased unemployment for next year and 2024 in predictions updated last month. It is anticipated that the unemployment rate would increase to 4.6% by the end of 2023. That would indicate a major increase in unemployment and, as projected by a number of economists, a recession.
The Fed’s rate increases over the past year have made it more expensive for customers to get mortgage and vehicle loans, as well as increased credit card interest rates.
Mortgage rates are now around 6%, which is roughly double what they were before the Federal Reserve began to restrict lending. The housing sector has been severely impacted by rising mortgage rates, with sales of existing homes falling for ten consecutive months.
Despite the solid state of the job market, layoffs have increased in the technology industry, which is coping with decreased demand as inflation squeezes businesses and families.