WASHINGTON, March 9 (Reuters) – The number of Americans filing new claims for unemployment benefits rose by the most in five months last week, but the underlying trend is consistent with a tight labor market.
Part of the larger-than-expected increase in claims reported by the Labor Department on Thursday reflected a surge in applications in New York state, which some economists attributed to the mid-winter school vacation from Feb. 20-24. Registrations have also risen sharply in California.
“Even after accounting for the recent increase, jobless claims are exceptionally low by historical standards, underscoring how tight labor market conditions still remain,” said Michael Pearce, lead U.S. economist at Oxford Economics in New York.
“This may be an early sign that the increase in announced layoffs is starting to filter down to some job losses, but not all announced layoffs are translating into job cuts.”
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Initial claims for state jobless benefits rose 21,000 to a seasonally adjusted 211,000 in the week ended March 4. That was the biggest increase since October and pushed claims to a two-month high. However, claims remained below the 300,000 level associated with a recession.
Economists polled by Reuters had forecast 195,000 claims in the latest week. The four-week moving average for new claims, the best gauge of labor market trends, rose 4,000 to 197,000 last week as it strips out weekly fluctuations.
Claims remained below 200,000 for seven weeks, indicating that high-profile job cuts in the tech sector have not had a significant impact on the labor market.
Economists have previously argued that seasonal adjustment factors, a model the government uses to remove seasonal fluctuations from the data, could hamper claims.
Seasonal adjustment factors for 2023 will be updated at the end of March. Goldman Sachs believed about half of last week’s claims were due to residual weather.
“Seasonal adjustment issues have increased downward pressure on initial claims over the past few months, and that pressure will begin to reverse in a few weeks, although annual adjustments for seasonal factors in early April may eliminate seasonal distortions,” Goldman Sachs said in a note.
Unadjusted claims rose by 35,357 last week to 237,513. They were boosted by 16,363 filings in New York and 10,489 in California. There were also significant increases in applications in Kentucky, Oregon and Ohio. But claims dropped significantly in Rhode Island and Massachusetts.
According to Lou Crandall, chief economist at Wrightson ICAP, the increase in New York state claims was “a predictable response to last week’s mid-winter school break and will be reversed in next week’s report.” Crandall saw the increase in California filings as “more likely to continue,” and expected overall claims to retreat to the 195,000-200,000 range when this week’s data is released next Thursday.
Stocks traded higher on Wall Street. The dollar fell against a basket of currencies. US Treasury rates were mixed.
Lack of skilled workers
Wednesday’s data showed there were 1.9 job openings for every unemployed person in January. The Fed’s “Beige Book” report, also released Wednesday, described the jobs market as “solid” in February, and noted “scattered reports of layoffs” and that “finding workers with desired skills or experience remained challenging.”
With the labor market continuing to tighten, inflation readings strong and consumer spending strong in January, Federal Reserve Chairman Jerome Powell told lawmakers this week that the U.S. central bank should raise interest rates more than expected.
Financial markets have priced in a 50-basis-point rate hike at the Fed’s March 21-22 policy meeting, according to CME Group’s FedWatch tool.
The central bank has raised its policy rate by 450 basis points since last March from near zero to the current range of 4.50%-4.75%.
Feb. The number of people receiving benefits rose by 69,000 to 1.718 million in the week ending the 25th after the initial week of aid. So-called continuation claims are down, suggesting some laid-off workers can easily find new work.
The claims data has no bearing on the February employment report due out on Friday because it falls outside the survey period.
Nonfarm payrolls may have increased by 205,000 jobs in February after rising 517,000 in January, according to a Reuters poll of economists. The unemployment rate is projected to remain unchanged above a 53-1/2-year low of 3.4%.
However, the labor market is cooling at the edges. Global employment firm Challenger, Gray & Christmas reported on Thursday that job cuts reported by US-based employers fell 24% in February to 77,770. However, planned layoffs are up 410% compared to the same period last year. It was the highest February total since 2009.
Job cuts are concentrated in the technology sector, which accounted for 28% of the layoffs announced last month. Retailers and financial institutions are also downsizing.
“With 1.9 vacancies per job seeker, laid-off workers appear to be quickly finding reemployment, making unemployment dynamics starkly different from historical experience, in the event that layoffs continue to rise,” said Conrad DiQuadros, senior economic adviser at Brain Capital in New York. York.
Report by Lucia Muticani; Editing by Chisu Nomiyama, Andrea Ricci and Paul Simao
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