The number of Americans filing new claims for unemployment benefits increased last week, but remains in a range that indicates the US labor market remains tight, even as the Federal Reserve works to cool demand for labor. This is done as part of its attempt to reduce inflation.
Initial claims for state unemployment benefits rose 9,000 to a seasonally adjusted 225,000 for the week ending Dec. 24, the Labor Department said Thursday. Economists polled by Reuters had forecast 225,000 applications for the past week.
Application numbers have been erratic in recent weeks, but have remained well below the 270,000 threshold that economists see as a red flag for the job market. A series of layoffs in the technology sector and interest rate-sensitive industries such as housing have yet to leave a noticeable mark on claims, as laid-off workers appear to be accessing new jobs with relative ease.
Federal Reserve Chairman Jerome Powell, the main architect behind the central bank’s aggressive interest rate hikes aimed at reining in too-high inflation, said earlier this month that “it looks like we have a structural shortage of construction site”.
In fact, the labor market resilience is a central focus for Fed policymakers, as the US economy has created an average of 392,000 new jobs per month this year despite rapid rate hikes and growing fears of a recession next year. Officials see that strength as giving them ample scope to continue raising interest rates to reduce inflation, which by their preferred measure remains nearly three times its 2% annual target level, even if it has recently shown signs of declining.
Economists believe companies are likely to cut back on hiring before embarking on layoffs. Employers have generally been reluctant to lay off workers after struggling to find labor during the COVID-19 pandemic.
The claims report showed the number of people receiving benefits after an initial week of relief rose from 41 billion to 1.71 billion in the week ending Dec. 17.
Those so-called continuing claims, a gauge of hiring, have risen since early October, and the latest report is the first since February to show they have reached the trend level of 1.7-1.8 million that prevailed in the years leading up to the pandemic. , a level then seen as emblematic of a tight labor market.