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

The number of Americans filing for unemployment benefits benefits claims rose slightly last week. This indicates that there is still a tight labor market, despite growing fears of recession as the US Federal Reserve tries to dampen demand.

Although the U.S. Department of Labor’s weekly reports on jobless claims showed that the unemployment rate (or so-called persistent claim) rose to a 10-month peak in November, economists warned against reading too much into it. Data is unpredictable around this time of the year.

The US central bank will continue to raise interest rates for some time due to the tight labor market and resilience.

“It is too early to interpret higher sustained claims as a signal of an easing in the labor market,” said Isfar Munir, an economist at Citigroup in New York. “Vacation is generally not appealing for employees to start new jobs, which is compounded when many companies temporarily close during holiday season.”

Initial claims for unemployment benefits increased by 4,000 to 230,000 for the week ended Dec. 3. According to economists’ expectations, the increase last week was similar to that expected. The 270,000 threshold is well below claims, which economists believe would signal a problem in the job market.

The holiday season can cause claims to fluctuate as businesses close or delay hiring. This can make it difficult for job seekers to see the real picture of the market. They soared to a three-month peak a week before Thanksgiving, but then dropped to almost flatten the next week.

However, there has been an increase in layoffs within the technology sector. In November, Twitter, Amazon, and Meta, Facebook’s parent company cut thousands of jobs.

Unadjusted claim numbers rose by 87,113 and 286,436 last Week, driven by large increases in California, New York Georgia, Texas, and Texas. Notable increases were also noted in Washington, Illinois, Pennsylvania and Indiana.

According to claims data, the number of people who received benefits in the first week of aid, which is a proxy for hiring, increased by 62,000 to 1.67 million in the week ended Nov. 26. This was the highest number of persistent claims since Feb.

The unemployment rate of people receiving unemployment benefits rose to 1.2%, the highest level since March. It was 1.1 percent the week prior. This means that the process of finding work takes longer for those who are unemployed.

Wall Street stocks were trading higher. The dollar fell against a basket currency. The yields of the US Treasury rose.

‘Modest easing’

“This could be a sign of modest easing in the tightness of the labor market and, if this tightness continues, it would be a warning for the outlook,” said Conrad DeQuadros, senior economic adviser at Brean Capital in New York.

DeQuadros warned, however, that it was difficult to adjust the Thanksgiving data to the season.

He said, “We need to wait and see whether the ongoing claims continue rising or if it falls modestly in December’s first week, as it did in 2020-2021.”

Other economists have also warned that the government reported a smaller increase in seasonal fluctuations when they adjusted the data using an alternative model.

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

Despite the steady rise in ongoing claims, there has not been a significant shift in labor market dynamics.

Last week, the government reported that nonfarm employment rose by 263,000 jobs in December. Economists believe tech companies are downsizing after they were overhired during the COVID-19 pandemic. They also note that small businesses are in desperate need of employees.

After having difficulty finding work following the pandemics, companies are also hoarding employees. There were 1.7 jobs available for every person who was unemployed in October.

In an effort to slow down inflation and slow down the labor force, the Fed increased its policy rate this year from close to zero to a range between 3.75 percent and 4 percent. This is the fastest rate increase cycle since 1980.

Economists predict that the Fed will continue to tighten monetary policy and raise policy rate above the previously projected 4.6 percent. This could be a trend that could continue for some time.

Expectations for both initial and ongoing claims to rise slowly, largely due white-collar layoffs.

“There will likely be more redundancies among white-collar workers because of the limited supply of labor, which is less binding on white-collar workers,” said Nancy Vanden Houten, chief US economist at Oxford Economics in New York. “Companies keep low-skilled workers in their ranks because they are difficult to find and keep.”

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Merry

Merry C. Vega is a highly respected and accomplished news author. She began her career as a journalist, covering local news for a small-town newspaper. She quickly gained a reputation for her thorough reporting and ability to uncover the truth.

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