Claims figures have sputtered in recent weeks, but they have held well below the 270,000. Threshold that economists see as a red flag for the labor market.
The number of Americans filing new claims for unemployment benefits rose last week. But remained within a range that suggests the US job market remains tight. Even as the Federal Reserve works to reduce demand for labor as part of its bid to reduce inflation.
Initial claims for state unemployment benefits rose 9,000 to a seasonally adjusted 225,000 in the week. Ended Dec. 24, the Labor Department said Thursday. Economists polled by Reuters had forecast 225,000 claims in the latest week.
The claims figure has sputtered in recent weeks but remains well below the 270,000 threshold that economists see as a red flag for the labor market. A raft of layoffs in the tech sector and interest rate-sensitive industries like housing have yet to make a significant. Dent on claims as laid-off workers cycle into new jobs with relative ease.
Federal Reserve Chair Jerome Powell — the chief architect of the central bank’s. Aggressive rate hikes aimed at bringing high inflation to heel — said earlier this month. “It looks like we have a structural labor shortage there.”
Indeed, labor market resilience is a central focus for Fed policymakers, as the U.S. economy. Added an average of 392,000 new jobs per month despite faster rate hikes this year and growing fears of a recession next year. Officials see this strength as enough room to continue raising interest rates to bring down. Inflation, which according to their preferred measure remains around three times their target of 2% a year although. It has recently shown signs of easing.
The central bank raised rates from near zero in March to the current range of 4.25% to 4.50%. And Fed officials expect it to breach the 5% mark in 2023, a rate not seen since 2007.
Economists believe that companies can reduce hiring before starting layoffs. Employers are generally reluctant to lay off workers after struggling to find labor during the Covid-19 pandemic.
The claims report showed that aid rose by 41,000 to 1.710 million in the week ended December 17 in the initial week.
These so-called continuing claims, a proxy for hiring, have risen since early October, and the latest report is the first since February. That shows 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 a symbol of a tight labor market.