US jobless claims fell last week as layoffs remain low
Fewer Americans filed for unemployment last week as the job market continues to boom despite efforts by the Federal Reserve to cool the economy and tame inflation.
U.S. jobless claims for the week ending March 11 fell 20,000 to 192,000 from 212,000 the previous week, the Labor Department said Thursday.
The four-week moving average for claims, which flattens some of the week-to-week volatility, fell 750 to 196,500, remaining below the 200,000 threshold for the eighth straight week.
Unemployment claims seen as a barometer of layoffs in the United States
In a note to clients, analysts at Oxford Economics said there were still few signs that the recent increase in layoff announcements, particularly in the tech sector, is translating into higher unemployment.
“Many announced layoffs are not happening, and those who have been laid off are quickly finding work elsewhere, reflecting the continuing imbalance between labor supply and demand,” the analysts wrote.
At its February meeting, the Fed raised its main policy rate by 25 basis points, the eighth consecutive rate hike in its year-long battle against stubborn inflation. With recent data showing that these rate hikes have done little to bring inflation down let alone cool the economy and labor market, many analysts expected the Fed to raise its rates another half point when it meets next week.
However, the second and third largest bank failures in US history over the past week – which have been blamed largely on rising interest rates – have led some economists to believe that officials will move more lightly next week and raise its rate by 25 basis points or maybe not at all.
The central bank’s benchmark rate is now in a range of 4.5% to 4.75%, its highest level in 15 years. Prior to the banking sector turmoil that began last week, the Fed had signaled that two more rate hikes were likely this year. Some analysts had even forecast three increases that could push the bottom of this rate to 5.5%.
Fed rate hikes are meant to cool the economy, labor market and wages, stifling prices. But so far, none of that has happened, at least not to the extent the central bank had hoped.
Inflation remains more than double the Fed’s 2% target, and the economy is growing and creating jobs at a healthy pace.
Last month, the government announced that employers added 311,000 jobs in February, less than January’s huge gain, but enough to keep pressure on the Federal Reserve to aggressively raise interest rates to fight against inflation. The unemployment rate fell to 3.6% from a 53-year low of 3.4%.
Fed policymakers have forecast the jobless rate to reach 4.6% by the end of this year, a sizable increase historically associated with recessions.
Although the U.S. job market remains strong, layoffs are on the rise in the tech sector, where many companies have overhired after a pandemic boom. IBM, Microsoft, Amazon, Salesforce, Twitter and DoorDash have all announced layoffs in recent months.
Earlier this week, Facebook parent Meta said it was cutting another 10,000 jobs, in addition to the 11,000 cut in November. The social media giant also said it would not fill 5,000 vacancies.
The real estate sector was the hardest hit by the Fed’s interest rate hikes. Rising mortgage rates – which have risen again by almost 7% in recent weeks – have slowed home sales for 12 straight months. That’s almost in line with the Fed’s rate hikes that began last March.
About 1.68 million people were receiving unemployment assistance in the week ending March 4, down 29,000 from the previous week. This number is close to pre-pandemic levels.