The number of Americans filing new claims for unemployment benefits climbed less than anticipated last week, indicating a still-tight labor market, although the third-quarter GDP returned quicker than originally thought.
In an effort to combat inflation, the Federal Reserve could continue to raise interest rates to a higher level and maintain them there for a while if the labor market continues to be robust, as evidenced by a slight decline in the unemployment rate in early December after a mostly upward trend from October.
Christopher Rupkey, chief economist of FWDBONDS in New York, stated, “The economy is not as near to its demise as the markets had believed.” “The Fed may need to hike interest rates again in 2023, as the economy shows no signs of decelerating and rising pricing pressures may endure.”
Initial claims for state unemployment benefits increased by 2,000 to a seasonally adjusted 216,000 for the week ending December 17, with the majority of the previous week’s fall remaining intact, according to statistics released by the Labor Department on Thursday.
Reuters questioned economists who predicted 222,000 claims for the most recent week.
In recent weeks, claims have fluctuated, but have remained below the 270,000 threshold that, according to experts, would raise a warning flag for the labor market.
Numerous layoffs in the technology industry and interest-rate-sensitive businesses, such as the housing market, have not had a significant influence on claims. Claims decreased by 4,064 to 247,867 last week, due to major decreases in California, Indiana, Ohio, and Texas, which were offset by a significant increase in Massachusetts.
Jerome Powell, chairman of the Federal Reserve, stated last week that “it feels like there is a structural labor shortage out there.” The central bank raised its policy rate by 50 basis points to a range of 4.25 to 4.50 percent last week, the highest level since late 2007. Next year, Fed officials anticipate a rate increase to between 5% and 5.25%.
Hoarding workers
The claims data covers the time during which the agency polled businesses for the nonfarm payrolls portion of the jobs report for December.
Claims declined moderately between the November and December survey weeks, indicating another month of robust employment growth. This year, job growth has averaged 392,000 per month. Next week’s data on the number of unemployed individuals will provide additional insight into the state of hiring in December.
Economists anticipate that corporations will reduce hiring before implementing layoffs. After struggling to obtain labor during the COVID-19 pandemic, employers have generally been hesitant to lay off workers.
The number of individuals getting benefits after the initial week of aid decreased by 6,000 to 1,672 million in the week ending December 10, a 10-month low. Since early October, the so-called continuing claims, a proxy for hiring, exhibited a rising trend.
Some economists interpreted the constant increase in continuing claims as a sign of business apprehension in anticipation of the predicted recession next year. Others, however, objected against interpreting this as evidence of an improving labor market, noting that the majority of workers chose not to begin a new job during the Christmas season and that many businesses also temporarily close at this time.
Strength on the labor market is supporting the economy by generating good wage improvements, which are contributing to increased consumer spending. Thursday’s release of a second report by the Commerce Department reaffirmed that the economy regained in the third quarter after declining in the first half of the year.
»Claims for unemployment climb little, but the labor market remains tight«