US weekly jobless claims fall to nine-month low; productivity gains momentum

  • Weekly jobless claims fell by 3,000 to 183,000
  • Pending claims fell by 11,000 to 1.655 million
  • Output accelerated to a 3.0% pace in the fourth quarter
  • Unit labor costs grew by 1.1%

WASHINGTON, Feb 2 (Reuters) – The number of Americans filing new claims for unemployment benefits fell to a nine-month low last week, as the labor market held steady despite higher borrowing costs and rising fears of a recession this year.

An unexpected drop in weekly jobless claims reported by the Labor Department on Thursday fueled cautious optimism that the economy may be in recession or merely experiencing a shallow and brief recession. Federal Reserve Chairman Jerome Powell told reporters on Wednesday that “the economy can return to 2% inflation without a really significant slowdown or a really big increase in unemployment.”

“One day soon, economists will have to reverse those calls for a recession in 2023 because the labor market refuses to retreat from the lowest unemployment rate in decades,” said Christopher Rupkey, chief economist at FWDBONDS in New York.

Initial claims for state jobless benefits fell to a seasonally adjusted 183,000 in the week ended Jan. 28, the lowest level since April 2022. This is the third consecutive weekly decline in applications. Economists polled by Reuters had forecast 200,000 claims for the final week.

Latest Updates

See 2 more stories

Unadjusted claims fell by 872 last week to 224,356. Kentucky, California and Ohio saw notable declines in filings, offsetting increases in Georgia and New York.

Claims are down this year, consistent with a continued tight labor market. On Wednesday, the government said there were 11 million jobs at the end of December, and 1.9 jobs for every unemployed person.

“The labor market has yet to respond meaningfully to the rapid rise in interest rates,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.

Outside of the technology industry and interest-rate-sensitive sectors such as housing and finance, employers have refrained from laying off workers after struggling to find workers during the pandemic, but also because they are optimistic economic conditions will improve later this year.

A report from the Institute for Supply Management said on Wednesday that producers “indicate they will not significantly reduce head count as they look ahead to the second half of the year.”

Stocks were trading higher on Wall Street. The dollar rose against a basket of currencies. US Treasury yields fell.


On Wednesday, the US central bank raised its policy rate by 25 basis points to a range of 4.50-4.75% and promised “sustained increases” in borrowing costs.

The claims report showed that the number of people receiving benefits fell by 11,000 to 1.655 million in the week ending Jan. 21, after the first week of aid to hire advocates. This is called continuing claims, which partially revised the increases recorded in the previous two weeks.

The claims data is unrelated to the January employment report, which is scheduled to be released on Friday, as it falls outside the survey period. Nonfarm payrolls rose by 185,000 jobs last month, according to a Reuters poll of economists.

In December, 223 thousand jobs were created in the economy. The unemployment rate appeared to have risen to 3.6% in December from a more than 50-year high of 3.5%.

A surge in layoffs in the technology sector in January added to job cuts. A separate report Thursday from global outsourcing firm Challenger, Gray & Christmas showed job cuts announced by US-based employers rose 136% to 102,943. This is the highest January reading since 2009.

The technology sector accounted for 41% of the job cuts, with 41,829 layoffs. Retailers cut 13,000 jobs, while financial firms planned to cut 10,603 jobs.

Unemployment claims and Challenger layoffs

“It is difficult to fully reconcile the seemingly conflicting 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 applying for unemployment insurance. This could be because people can easily find a new job or because severance payments are delaying their eligibility for unemployment benefits.”

Despite the tight labor market, wage inflation is slowing and may continue to do so, as the Labor Department’s third report showed that labor productivity accelerated to the fastest annual rate of 3.0% in a year after rising 1.4% in the fourth quarter. in the third quarter.

Productivity decreased by 1.5% compared to a year ago and by 1.3% in 2022. However, the main reason for this was the distortions caused by the COVID-19 pandemic. Productivity increased by 5.1% from the fourth quarter of 2019.

As a result, unit labor costs – the cost of labor per product unit – increased by 1.1%. That was the smallest gain since the first quarter of 2021 and followed a 2.0% growth rate in the third quarter. While unit labor costs rose 4.5% from a year ago, they were down from their peak of 7.0% in the 12 months to the second quarter of 2022.

Labor costs and productivity

“The bottom line is that even with rising unemployment and questionable job stability, the labor market no longer appears to be a significant source of inflationary pressure,” said Paul Ashworth, chief North American economist at Capital Economics in Toronto. .

Reporting by Lucia Mutikani; Edited by Andrea Ricci

Our standards: Thomson Reuters Trust Principles.

Source link