The number of Americans filing new claims for unemployment benefits increased moderately last week, suggesting that the labour market was gradually losing momentum as higher borrowing costs curb demand in the broader economy.
The weekly jobless claims report from the Labour Department yesterday also showed unemployment rolls declining in late November after the so-called continuing claims hit a two-year high in the middle of the month.
While the mixed report supported economists’ views that the Federal Reserve was likely done raising interest rates this cycle, it suggested that financial market expectations of a cut as early as the first quarter were premature.
“There is no cumulative deterioration yet in the labour market that has caused previous Fed chairs to pivot quickly from rate hikes to rate cuts to support the economy,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “The data will keep the Fed on the sidelines watching carefully with the risks of doing too much or too little roughly balanced.”
Initial claims for state unemployment benefits rose 1,000 to a seasonally adjusted 220,000 for the week ended December 2, the Labour Department said yesterday. Economists polled by Reuters had forecast 222,000 claims for the latest week.
Claims data are volatile around this time of the year because of holidays, making it harder to get a clear signal on the labour market. The volatility is likely to persist into early January.
Unadjusted claims increased 93,761 to 293,511 last week. Claims in California surged 14,057 while filings in New York soared 9,343. Texas reported a 7,698 jump in claims and applications increased 6,481 in Georgia. Nearly a dozen other states, including Illinois, Indiana, Pennsylvania and Oregon reported an increase in claims above 2,000.
“Looking past the noise, initial claims remain at a level that is consistent with relatively low layoffs,” said Nancy Vanden Houten, lead US economist at Oxford Economics.
A separate report from global outplacement firm Challenger, Gray & Christmas yesterday showed US-based employers announced 45,510 job cuts in November, up 24 per cent from October. But planned layoffs dropped 41pc compared to a year ago.
The government reported this week that there were 1.34 job openings for every unemployed person in October, the lowest since August 2021. Slowing economic activity was highlighted by a third report yesterday from the Commerce Department’s Census Bureau showing wholesale inventories declining 0.4pc in October, instead of falling 0.2pc as estimated last month.
Economists expect business inventories to subtract from gross domestic product in the fourth quarter. Private inventory investment contributed 1.40 percentage points to the economy’s 5.2pc annualised growth pace in the third quarter. Growth estimates for the October-December quarter are below a 2pc rate.
Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. US Treasury yields rose.
With the labour market not falling off the rails, most economists are not predicting a recession. Loosening labor market conditions together with subsiding inflation have led financial markets to conclude that the Fed’s monetary policy tightening campaign is over. Financial markets are anticipating a rate cut as soon as the first quarter of 2024, according to CME Group’s FedWatch Tool.
The US central bank is expected to leave rates unchanged next Wednesday. Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25pc-5.50pc range.
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