The number of Americans applying for unemployment benefits fell to its lowest level in more than three months last week, reflecting a still-robust job market despite efforts by the Federal Reserve to cool the economy and lower the high inflation for decades.
Unemployment assistance claims for the week ending Dec. 31 fell by 19,000 to 204,000, the Labor Department reported Thursday.
The labor market is being closely watched by Fed policymakers, who raised interest rates seven times last year in an effort to slow job growth and bring down stubbornly high inflation. So far, there is no indication that it has weakened the labor market enough for the Fed to change course in 2023.
Also on Thursday morning, payroll processing company ADP said the economy had gained 235,000 jobs, well above expectations.
The four-week moving average for claims, which evens out some of the week-to-week volatility, fell from 6,750 to 213,750.
Unemployment claims are generally seen as a proxy for layoffs, which have been relatively weak since the pandemic shed around 20 million jobs in the spring of 2020.
About 1.69 million people were receiving unemployment assistance the week ending December 24, about 24,000 less than the previous week.
On Wednesday, the government announced that job vacancies fell slightly in November, but remained strong. There were 10.46 million vacancies on the last day of November, down slightly from 10.51 million in October. But there are still nearly 1.8 jobs for every unemployed person, whereas before the pandemic there were generally more unemployed people than jobs.
The government releases its December jobs report on Friday, with economists polled by data firm FactSet expecting the US economy to have gained another 200,000 jobs, a healthy number. Employers added 263,000 jobs in November and the unemployment rate remained at a low 3.7%.
In its updated forecast, Fed policymakers predicted slower growth and higher unemployment for next year and 2024. The jobless rate is expected to climb to 4.6% by the end of 2023. This would mark a significant increase in unemployment and would generally reflect a recession. , which many economists have predicted.
The Fed’s rate hikes last year made it more expensive for consumers to take out mortgages and auto loans and raised borrowing rates for credit cards.
Mortgage rates are above 6%, essentially double what they were before the Fed started tightening credit. Rising mortgage rates hammered the housing market as sales of existing homes fell for 10 straight months.
Although the U.S. labor market remains robust, layoffs are mounting in the tech sector, which faces falling demand as inflation squeezes both businesses and homes.
New York Post