U.S. labor market resilient as recession signals grow stronger


  • Weekly jobless claims rise 5k to 213k
  • Continuing claims down 22,000 to 1.379 million

WASHINGTON, Sept 22 (Reuters) – The number of Americans filing new jobless claims rose slightly last week, suggesting the job market is tight despite the Federal Reserve’s attempt to cool demand with aggressive rate hikes remains.

The Labor Department’s weekly jobless report on Thursday, the latest data on the health of the economy, suggested job growth remained solid this month. The US Federal Reserve hiked interest rates by 75 basis points on Wednesday, the third straight hike of this magnitude. It signaled more big raises to come this year. Continue reading

“Fed officials are hitting the brakes hard, but so far employers are just giving this policy a big, big yawn and holding on to their workers,” said Christopher Rupkey, chief economist at FWDBONDS. “Either that or there will be some kind of stealthy job loss where those laid off don’t get unemployment benefits.”

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Initial jobless claims rose by 5,000 to a seasonally adjusted 213,000 for the week ended September 17, the Labor Department said on Thursday. Data for the previous week has been revised to show 5,000 fewer claims than previously reported. Economists polled by Reuters had forecast 218,000 applications last week.

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Fed Chair Jerome Powell told reporters on Wednesday that “there is only modest evidence the job market is cooling” and described it as remaining “out of balance”.

Since March, the Fed has raised interest rates by three percentage points to the current range of 3.00% to 3.25%.

Unadjusted claims rose 19,385 last week to a still low 171,562. There was a surge in applications 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 struggling to hire over the past year as the COVID-19 pandemic forced some people out of the workforce, in part because of prolonged illnesses caused by the virus.

At the end of July there were 11.2 million job vacancies, with two jobs for every unemployed person.

Wall Street stocks traded lower. The dollar rose against a basket of currencies. US Treasury bond prices fell.

unemployment claims

NO MATERIAL CHANGE

The damage report covered the period when the government surveyed companies for the non-farm payroll portion of the September jobs report.

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Applications fell by 32,000 between the August and September survey periods, suggesting that job growth has maintained its buoyant pace this month. The number of employees rose by 315,000 in August. Employment is now 240,000 jobs above pre-pandemic levels.

Expectations of solid job gains in September were supported by data from time management firm UKG on Thursday, which showed its monthly Workforce Recovery Index was flat from August.

“With slight declines in labor activity in six of the last seven months, we see no sign of widespread layoffs, at least in industries that rely on hourly workers,” said Dave Gilbertson, UKG vice president.

The claims report showed that the number of people receiving benefits after an initial week of assistance fell by 22,000 to 1.379 million in the week ended September 10. Data next week on so-called continued applications, a proxy for hiring, will shed more light on the September employment picture.

The Fed on Wednesday raised its median forecast for this year’s unemployment rate to 3.8% from its previous forecast of 3.7% in June. It raised its estimate for 2023 to 4.4% from the 3.9% forecast in June, a move economists saw as recessionary. The unemployment rate rose to 3.7% in August from 3.5% in July.

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“Historically, a recession followed a one-year rise in the unemployment rate by this magnitude,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania. “The jury is still out on whether the Fed can pull off a soft landing.”

Recession risks are mounting, with a third report from the Conference Board showing the Leading Economic Index fell 0.3% last month after falling 0.5% in July. The index, an indicator of future US economic activity, fell 2.7% between February and August, reversing a 1.7% gain in the previous six months.

This pushed the index’s six-month average change below -0.4%, a threshold historically associated with a recession.

“The fact that the six-month change crossed the historic recession level does not guarantee a recession is imminent, but it does signal that economic weakness is spreading,” said Shannon Seery, economist at Wells Fargo in New York. “Combined with continued tightening in financial conditions as the Fed tightens aggressively, this suggests a recession may be harder to avoid.”

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Reporting by Lucia Mutikani; Edited by Chizu Nomiyama and Paul Simao

Our standards: The Thomson Reuters Trust Principles.



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