WASHINGTON, Nov 23 (Reuters) – The number of Americans filing new claims for unemployment benefits hit a three-month high last week amid rising tech layoffs, but that does not likely not suggest a material change in labor market conditions, which will remain tight.
Economists urged not to over-interpret the increase in weekly jobless claims reported by the Labor Department on Wednesday, noting that data tends to be volatile at the start of the holiday season, with businesses temporarily closing or slowing down hiring. Claims remain consistent with pre-pandemic levels.
“It’s certainly possible that the layoffs are helping to spur the increase in claims filings,” said Isfar Munir, an economist at Citigroup in New York. “While this could be interpreted as evidence of a labor market slowdown, we would caution against this. The holiday season introduces a lot of volatility into this data. It can be difficult to disentangle the impact of seasonal trends. compared to layoffs through January.”
Initial claims for state unemployment benefits rose 17,000 to a seasonally adjusted 240,000 for the week ended Nov. 19, the highest level since mid-August. Economists polled by Reuters had forecast 225,000 claims for the past week.
Moody’s Analytics estimates the break-even point for claims at around 270,000. The job market remained resilient in the face of the Federal Reserve’s most aggressive interest rate hike cycle since the 1980s aimed at curbing inflation high by dampening demand in the economy.
Economists say massive fluctuations due to the COVID-19 pandemic have distorted seasonal adjustment factors, the model the government uses to remove seasonal fluctuations from data.
According to Brean Capital’s senior economic adviser, Conrad DeQuadros, seasonally adjusting the raw claims data with the average of the adjustment factors for 2005 and 2011, the years the timeline aligned to in 2022, would have resulted in a claims increase of just 3,000 in the past week.
“Nevertheless, the claims data should be watched closely in the coming weeks to see if this increase in claims is anything but noise or poor seasonal adjustment,” DeQuadros said.
There has been a spike in layoffs across the tech sector, with Facebook’s parent company Twitter, Amazon (AMZN.O) and Meta (META.O) announcing thousands of job cuts this month. . Companies in interest-sensitive sectors like housing and finance have also sent workers home.
Unadjusted claims jumped from 47,909 to 248,185 last week. They were boosted by a jump of 5,024 in California, likely reflecting job cuts in the tech sector. There were also large increases in filings in Georgia, Illinois, Minnesota, Iowa, New York, Ohio and Michigan.
Economists, however, did not expect layoffs in the tech sector to be a major drag on the labor market and the economy in general. They noted that companies outside of the tech and housing sectors were hoarding workers after struggling to find labor in the wake of the COVID-19 pandemic.
This was acknowledged by some Fed officials in the minutes of the US central bank’s November 1-2 policy meeting released on Wednesday. The minutes showed that “these participants noted that this consideration had limited layoffs even as the economy as a whole had softened or that this behavior could limit layoffs if overall economic activity were to slow further. “.
With 1.9 job vacancies for every unemployed person in September, some of the laid-off workers could quickly find new jobs.
Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. US Treasury prices rose.
NOT IN RECESSION
The claims report also showed that the number of people receiving benefits after a first week of help rose by 48,000 to 1.551 million in the week ending November 12.
The so-called continuing claims, an indicator of hiring, covered the period when the government polled households for the November unemployment rate. Continuing claims increased between the October and November survey periods. Economists, however, predict an unchanged unemployment rate of 3.7%.
There are also signs of resilience in business capital expenditure, one of the two pillars of support for the economy. A separate report from the Commerce Department showed that orders for non-military capital goods excluding aircraft, a closely watched indicator of business spending plans, rose 0.7% in October. These so-called basic capital goods orders fell 0.8% in September.
Shipments of basic capital goods jumped 1.3% after falling 0.1% in September. The report added to strong retail sales last month by suggesting the economy has continued to expand, although the risks of a recession next year are rising as Fed rate hikes appear to stifle demand. .
A survey from S&P Global on Wednesday showed its flash U.S. composite PMI production index, which tracks the manufacturing and services sectors, contracting further in November, with a measure of new orders falling to its lowest level in 2 years and half.
“The recession is not here today, but we continue to believe that economic conditions will deteriorate in 2023,” said Oren Klachkin, chief US economist at Oxford Economics in New York. “The recession will be a ‘garden’ type downturn because there are no glaring imbalances in the household or business sector.”
There has been some rare good news in the housing market, which has been battered by soaring mortgage rates. A fourth Commerce Department report showed new home sales, which account for 12.5% of U.S. home sales, rebounded 7.5% to a seasonally adjusted annual rate of 632,000 units in October. .
The National Association of Home Builders reported a surge last week in the number of builders offering incentives, including price cuts to sell homes.
“Although demand has fallen from a year ago, many buyers are waiting behind the scenes for either a downward price adjustment or lower mortgage rates,” Orphe Divounguy, senior economist at Zillow told Reuters. Seattle.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
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