Weekly US jobless claims fall to 9-month low; productivity picks up speed

WASHINGTON, Feb 2 (Reuters) – The number of Americans filing new jobless claims fell to a nine-month low last week as the job market remains resilient despite higher borrowing costs and soaring fears of a recession this year.

The surprise decline in weekly jobless claims reported by the Labor Department on Thursday raised cautious optimism that the economy could weather a recession or simply experience a brief, shallow downturn. Federal Reserve Chairman Jerome Powell told reporters Wednesday that “the economy can return to 2% inflation without a really significant recession or a really big rise in unemployment.”

“Someday soon, economists will have to dismiss those calls for a 2023 recession because the job market refuses to budge from the lowest unemployment rate in decades,” said Christopher Rupkey, chief economist at FWDBONDS in New York.

Initial claims for state unemployment benefits fell 3,000 to a seasonally adjusted 183,000 for the week ending Jan. 28, the lowest level since April 2022. It was the third straight weekly decline in claims. Economists polled by Reuters had forecast 200,000 applications for the past week.

Unadjusted claims fell 872 to 224,356 last week. There were notable declines in claims in Kentucky, California, and Ohio, which offset increases in Georgia and New York.

Applications have dropped this year, in line with a persistently tight job market. The government reported Wednesday that there were 11 million vacancies at the end of December, with 1.9 vacancies for every jobless person.

“The labor market has yet to respond meaningfully to a rapid rise in interest rates,” said Rubeela Farooqi, chief US economist at High Frequency Economics in White Plains, New York.

Outside of the technology industry and interest rate-sensitive sectors like housing and finance, employers have been reluctant to lay off workers after struggling to find jobs during the pandemic, and also because they are optimistic that Economic conditions will improve later this year.

A report from the Institute for Supply Management on Wednesday said manufacturers “indicate they will not substantially cut headcount as they are positive about the second half of the year.”

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

NARROW LABOR MARKET

The US central bank on Wednesday raised its policy rate by 25 basis points to the 4.50-4.75% range and promised “continued increases” in borrowing costs.

The claims report showed that the number of people receiving benefits after an initial week of aid, a proxy for hiring, fell 11,000 to 1.655 million during the week ending Jan. 21. That partially revised the increases posted in the previous two weeks in the so-called ongoing claims.

The claims data is unrelated to the January jobs report, which is scheduled for release on Friday, as it falls outside of the survey period. According to a Reuters survey of economists, nonfarm payrolls likely rose by 185,000 jobs last month.

The economy created 223,000 jobs in December. The unemployment rate is forecast to rise to 3.6% from a more than 50-year low of 3.5% in December.

The series of layoffs in the technology sector prompted job cuts in January. A separate report on Thursday from global relocation firm Challenger, Gray & Christmas showed job cuts announced by US-based employers rose 136% to 102,943. That was the highest January total since 2009.

The technology sector accounted for 41% of job cuts, with 41,829 layoffs. Retailers announced 13,000 job cuts, while financial firms planned to lay off 10,603 workers.

“It’s hard to fully square the seemingly contrasting messages from Challenger’s jobless claims data and job cuts data,” said Daniel Silver, an economist at JPMorgan in New York. “A possible explanation for the recent divergence is that people are being laid off, but they are not applying for unemployment insurance. This may be because people can easily find a new job or because severance payments are delaying eligibility for unemployment benefits. unemployment benefits”.

Despite the tight labor market, wage inflation is slowing and could continue to slow as a third report from the Labor Department showed that worker productivity accelerated to a 3.0% annualized rate in the fourth quarter, the fastest in a year, after increasing at a rate of 1.4%. in the third quarter.

Productivity fell at a rate of 1.5% from a year ago and fell 1.3% in 2022. But that was largely due to distortions caused by the COVID-19 pandemic. Productivity increased 5.1% from the fourth quarter of 2019.

As a result, unit labor costs (the price of labor per unit of output) increased at a rate of 1.1%. That was the smallest gain since the first quarter of 2021 and it followed a 2.0% growth pace in the third quarter. Although unit labor costs increased at a rate of 4.5% over the prior year, they were below their peak of 7.0% during the 12 months to the second quarter of 2022.

“The result is that, even without an increase in the unemployment rate and with suspiciously resilient job offers, the labor market no longer appears to be a significant source of inflationary pressure,” said Paul Ashworth, chief North America economist at Capital Economics in Toronto. .

Reporting by Lucía Mutikani; Edited by Andrea Ricci

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