US labor market still tight as unemployment hits 10-month high

The number of Americans filing new claims for unemployment benefits increased moderately last week, pointing to a still strong and tight labor market despite mounting fears of a recession as the US Federal Reserve struggles to rein in the demand.

Although the US Department of Labor’s weekly jobless claims report showed on Thursday jobless rolls, or so-called continuing claims, rose to a 10-month high in late November, economists cautioned against You should give too much importance to the movement since the data is volatile at this time of the year.

The tightness and resilience of the labor market keep the US central bank on track to continue raising interest rates for a while.

“It is too early to interpret the continued higher claims as a sign of a relaxed labor market,” said Isfar Munir, an economist at Citigroup in New York. “Holiday time is generally not attractive for workers to start a new job, which is exacerbated by the temporary closure of many businesses during the holiday period.”

Initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 230,000 for the week ending Dec. 3. Last week’s rise was in line with economists’ expectations. Applications are well below the 270,000 threshold, which economists say would be a red flag for the job market.

Claims tend to be volatile at the start of the holiday season, as businesses temporarily close or delay hiring, which can make it difficult to get a clear read on the job market. They shot up to a three-month high a week before the Thanksgiving holiday, only to nearly halt the rise the following week.

However, there has been a spike in layoffs in the technology sector, with Twitter, Amazon and Meta, the parent of Facebook, announcing thousands of job cuts in November.

Unadjusted claims rose 87,113 to 286,436 last week, driven by large increases in California, New York, Georgia and Texas. There were also notable increases in Illinois, Pennsylvania, Indiana, Ohio, New Jersey, and Washington state.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased by 62,000 to 1.671 million in the week ending Nov. 26, claims data showed. That was the highest level in continuous claims since February.

The jobless rate for people on jobless benefits rose to 1.2 percent, the highest since March, from 1.1 percent the week before. That suggests that the unemployed are taking a little longer to find work.

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

‘Modest decline’

“This could be a sign of a slight easing in the tight labor market and if it continues, it would sound like a cautionary note about the outlook,” said Conrad DeQuadros, senior economic adviser at Brean Capital in New York.

But DeQuadros also cautioned that the data was hard to seasonally adjust around Thanksgiving.

“We should wait to see if claims continue to rise or if the insured rate pulls back modestly in the first week of December like it did in 2020 and 2021,” he said.

Other economists also took a cautionary tone, arguing that adjusting the data for seasonal fluctuations with an alternative model showed a smaller increase than reported by the government.

“This could be particularly important for rolling claims data showing a clear upward trend for filings in recent months in official figures, but less noticeable of an upward movement using some alternate seasonal adjustments,” said Daniel Silver, JPMorgan economist in New York. York.

Despite the recent steady increase in continuing claims, there has not been a significant change in labor market dynamics.

The government reported last week that non-farm payrolls increased by 263,000 jobs in November. Economists say tech companies are adjusting size after overhiring during the COVID-19 pandemic, noting that small businesses remain desperate for workers.

Businesses are also hoarding workers after difficulties finding labor in the wake of the pandemic. There were 1.7 job offers for every unemployed person in October.

The Fed wants to slow the job market to cool inflation and raised its policy rate this year from near zero to a range of 3.75 percent to 4 percent in the fastest rate-raising cycle since the 1980s.

Economists expect the Fed to continue to tighten monetary policy and raise the policy rate to above the recently projected 4.6 percent, where it could stay for some time.

Initial and continuing claims are expected to gradually increase, driven largely by layoffs of white-collar workers.

“There will likely be more layoffs among white-collar jobs because of labor supply constraints, which are less binding among white-collar jobs,” said Nancy Vanden Houten, lead US economist at Oxford Economics in New York. . “Businesses are hoarding low-skilled workers because it has been hard to find and retain them.”