The number of Americans filing new claims for unemployment benefits increased last week but remained in a range, indicating that the job market in the United States remains tight, even as the Federal Reserve works to cool labour demand as part of its effort to lower inflation.
The Labor Department reported on Thursday that initial claims for state unemployment benefits increased by 9,000 to a seasonally adjusted 225,000 for the week ending December 24. Reuters polled economists, who predicted 225,000 claims for the most recent week.
The claims figures have been volatile in recent weeks, but they have remained well below the 270,000 mark, which economists regard as a red flag for the labour market. A slew of layoffs in the technology sector and interest-rate-sensitive industries like housing have yet to have a significant impact on claims, as laid-off workers appear to be able to easily transition into new jobs.
Federal Reserve Chair Jerome Powell said earlier this month that “it feels like we have a structural labour shortage out there,” referring to the central bank’s aggressive interest rate hikes aimed at bringing too-high inflation under control.
Indeed, the labour market’s resilience is a key focus for Fed policymakers, as the US economy has added 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 plenty of room to keep raising interest rates in order to bring down inflation, which, by their preferred measure, remains nearly three times their target level of 2% annually, despite recent signs of easing.
The Fed raised interest rates from near zero in March to the current range of 4.25% to 4.50%, and officials predict that it will reach 5% in 2023, a level not seen since 2007.
Economists believe that companies will reduce hiring before implementing layoffs. Employers have been hesitant to lay off workers in general after struggling to find workers during the COVID-19 pandemic.
According to the report of the claim, the number of people receiving benefits after an initial week of assistance increased by 41,000 to 1.710 million in the week ending Dec. 17.
Continuing claims, a proxy for hiring, have been trending higher since early October, and the latest report is the first since February to show them reaching the trend level of 1.7-1.8 million that prevailed in the years preceding the pandemic, a level seen as indicative of a tight labour market at the time.
