US labor market resilience as recession signals get stronger

  • Weekly jobless claims increased from 5,000 to 213,000
  • Continuing claims down 22,000 to 1.379 million

WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits increased moderately last week, indicating that the labor market remains tight despite the Federal Reserve’s attempt to quell demand with sharp interest rate hikes.

Thursday’s weekly jobless claims report from the Labor Department, the latest data on the health of the economy, indicated that job growth remained strong this month. The US central bank raised the interest rate by 75 basis points on Wednesday, the third consecutive increase of this size. He pointed to more big increases to come this year. Read more

“Fed officials are hitting the brakes hard, but so far employers are giving this policy a big yawn and are holding on tight to their workers,” said Christopher Robke, chief economist at FWDBONDS. “Either this is or there is some sort of hidden job loss where those who are laid off don’t get unemployment benefits.”

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The Labor Department said Thursday that initial claims for state unemployment benefits rose 5,000 to a seasonally adjusted 213,000 for the week ending September 17. Data for the previous week has been revised to show fewer applications being submitted than 5,000 previously reported. Economists polled by Reuters had expected 218,000 orders in the last week.

Federal Reserve Chairman Jerome Powell told reporters on Wednesday that “there is only modest evidence that the labor market is cooling,” describing it as “continuing to be unbalanced.”

Since March, the Fed has raised its policy rate by three percentage points to the current range of 3.00% to 3.25%.

Unadjusted claims rose 19,385 to 171,562 still low last week. There was a rise in the number of orders in Michigan and notable increases in California, Georgia, Massachusetts and New York. Only Indiana reported a significant drop in filings.

Economists say companies are hoarding workers after they struggled with hiring last year as the COVID-19 pandemic forced some people out of the workforce, in part due to the prolonged illness caused by the virus.

There were 11.2 million vacancies at the end of July, with two jobs for every unemployed person.

Stocks on Wall Street were trading lower. The dollar rose against a basket of currencies. US Treasury bond prices fell.

Unemployment claims

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The claims report covered the period during which the government surveyed businesses for the non-farm payroll portion of the September employment report.

The number of applications fell 32,000 between the survey periods in August and September, indicating that job growth maintained its rapid pace this month. The number of jobs rose by 315,000 jobs in August. Employment is now 240,000 jobs above its pre-epidemic level.

Expectations for strong job gains in September were supported by data on Thursday from time management firm UKG which showed that its monthly workforce recovery index was unchanged from August.

UKG Vice President Dave Gilbertson said: “With a slight decline in workforce activity in six of the past seven months, we see no sign of widespread layoffs, at least among industries that rely on hourly workers.”

The claims report showed that the number of people receiving benefits after an initial week of aid fell by 22,000 to 1.379 million in the week ended September 10. Data next week on the so-called continuing claims, an agent of employment, will shed more light. September recruitment profile.

The Federal Reserve on Wednesday raised its average forecast for the unemployment rate this year to 3.8% from its previous forecast of 3.7% in June. It boosted its 2023 estimate to 4.4% from the 3.9% forecast in June, a move economists viewed as stagnation. The unemployment rate rose to 3.7% in August from 3.5% in July.

“Historically, an unemployment rate increase of this magnitude has been followed by a recession year,” said Ryan Sweet, chief economist at Moody’s Analytics in West Chester, Pennsylvania. “The jury is still out on whether the Fed can implement a soft landing.”

Recession risks are growing, as a third report from the Conference Board showed that its leading economic index fell 0.3% last month after falling 0.5% in July. The index, a measure of future US economic activity, fell 2.7% between February and August, reversing a 1.7% increase over the previous six months.

This pushed the six-month average change in the index below -0.4%, a threshold historically associated with recessions.

“The fact that the six-month change has breached the historic recession threshold does not guarantee that a recession is imminent, but it does indicate that economic weakness is widening,” said Shannon Serry, an economist at Wells Fargo, New York. “This combined with continued tightening in financial conditions due to strong Fed tightening suggests that a recession may be difficult to avoid.”

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(Reporting by Lucia Mutikani) Editing by Chizu Nomiyama and Paul Simao

Our Standards: Thomson Reuters Trust Principles.

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