- Weekly jobless claims rose 17,000 to 240,000
- Pending claims increased by 48,000 to 1.551 million
- Basic capital goods orders rose 0.7% in October
- The supply of fixed capital goods increased by 1.3%
WASHINGTON, Nov 23 (Reuters) – The number of Americans filing new claims for unemployment benefits rose to a three-month high last week amid a surge in layoffs in the technology sector, but that likely did not signal a major change in labor market conditions. stay tight.
Economists urged not to read too much into the increase in weekly jobless claims reported by the Labor Department on Wednesday, noting that the data was volatile at the start of the holiday season due to temporary company shutdowns or a slowdown in hiring. Claims remain consistent with pre-pandemic levels.
“It’s certainly possible that the layoffs will help fuel the growth in claims,” said Isfar Munir, an economist at Citigroup in New York. “While this could be interpreted as evidence of a softening of the labor market, we would be cautious about it. The holiday season brings great volatility to these data. By January, it can be difficult to disentangle the impact of seasonal patterns on layoffs.”
Initial claims for state jobless benefits rose 17,000 to a seasonally adjusted 240,000 in the week ended Nov. 19, the highest level since mid-August. Economists polled by Reuters had forecast 225,000 claims for the final week.
Moody’s Analytics estimates the breakeven level for claims at around 270,000. The job market remains resilient amid the Federal Reserve’s most aggressive period of interest rate hikes since the 1980s, aimed at curbing high inflation by reducing demand in the economy.
Economists say the massive fluctuations due to the COVID-19 pandemic have distorted the seasonal adjustment factors in the model the government uses to extract seasonal fluctuations from the data.
Seasonally adjusting the raw claims data by averaging the adjustment factors for 2005 and 2011, the years the calendar adjusts to 2022, would have resulted in an increase of just 3,000 claims last week, according to Conrad DeQuadros, Chief Economic Advisor at Brean Capital.
“However, claims data will need to be closely watched in the coming weeks to see if this increase in claims is nothing more than noise or a weak seasonal adjustment,” DeQuadros said.
There has been a surge in layoffs in the tech sector, with Twitter, Amazon ( AMZN.O ) and Facebook parent Meta ( META.O ) announcing thousands of job cuts this month. Companies in interest rate-sensitive sectors such as housing and finance are also sending workers home.
Unadjusted claims rose by 47,909 last week to 248,185. They were boosted by a jump of 5,024 in California, likely reflecting job cuts in the technology sector. Georgia, Illinois, Minnesota, Iowa, New York, Ohio and Michigan also saw large increases in applications.
However, economists did not expect the tech sector cutbacks to be a major blow to the labor market and the overall economy. Businesses outside of the technology and housing sectors noted that they are laying off workers after struggling to find workers in the wake of the COVID-19 pandemic.
This was acknowledged by some Fed officials in the minutes of the US central bank’s November 1-2 policy meeting published on Wednesday. The minutes indicated that “these participants noted that this discretion has limited layoffs despite the softening of the broader economy, or that this behavior may limit layoffs if aggregate economic activity softens further.”
Some of the laid-off workers may find new jobs quickly, as 1.9 jobs were created for every unemployed person in September.
Stocks were trading higher on Wall Street. The dollar fell against a basket of currencies. US Treasury prices rose.
NOT A RECESSION
The claims report also showed that the number of people receiving benefits rose by 48,000 to 1.551 million in the week ended Nov. 12 after the first week of relief.
The ongoing claims, a proxy for hiring, covered the period when the government surveyed the household unemployment rate for November. Ongoing claims increased between the October and November survey periods. Economists predict that the unemployment rate will remain unchanged at 3.7%.
There were also signs of resilience in business spending on equipment, one of the two pillars supporting the economy. A separate report from the Commerce Department showed orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 0.7% in October. So-called core capital goods orders fell 0.8% in September.
Supplies of fixed capital goods rose 1.3% after falling 0.1% in September. The report showed the economy continued to expand on top of strong retail sales last month, although risks of a recession next year are rising as the Fed’s rate hikes stifle demand.
A survey by S&P Global on Wednesday showed the U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, contracted further in November and new orders fell to a 2-1/2-year low.
“A recession is not here today, but we continue to believe economic conditions will worsen in 2023,” said Oren Klachkin, chief U.S. economist at Oxford Economics in New York. “The recession will be a ‘garden variety’ recession because there is no noticeable household or corporate sector imbalance.”
There was rare commodity news in a housing market rocked by rising mortgage rates. The Commerce Department’s fourth report showed new home sales, which account for 12.5% of U.S. home sales, rose 7.5% in October to a seasonally adjusted 632,000 units.
The National Association of Home Builders reported last week a sharp increase in builders offering incentives, including price discounts, to sell homes.
“Although demand is down from a year ago, many buyers expect either a downward price adjustment or lower mortgage rates,” said Orphe Divounguy, chief economist at Zillow in Seattle.
Reporting by Lucia Mutikani; Edited by Chizu Nomiyama and Andrea Ricci
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