By | August 1, 2023
US weekly jobless claims fall as labor market remains tight

  • Weekly jobless claims fall by 11,000 to 239,000
  • Continued damage increases by 32,000 to 1.716 million
  • Mid-Atlantic factory activity rebounds in August

WASHINGTON, Aug 17 (Reuters) – The number of Americans filing new claims for jobless benefits fell last week, pointing to continued tightening in the labor market even as job growth slows.

The tightening of the labor market is supporting the economy, with data this week showing a solid increase in retail sales in July and an increase single family housing construction, prompting economists to raise their growth estimates for the third quarter. But that resilience increases the risk that the Federal Reserve could raise interest rates again.

“Labor markets are not imploding,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “The economy may be heating up instead of cooling because the monetary medicine of higher interest rates at 5.5% is not slowing aggregate demand as the economics textbooks say it should.”

Initial claims for state jobless benefits fell 11,000 to a seasonally adjusted 239,000 for the week ended Aug. 12, the Labor Department said Thursday. Economists polled by Reuters had forecast 240,000 claims in the past week.

Claims rose in the week ending Aug. 5, with filings in Ohio accounting for much of the increase.

The state, which has experienced fraudulent filings in the past, attributed the increase to layoffs in the manufacturing and auto industries. Automakers normally idle in July to remodel new models.

Unadjusted claims fell 15,067 to 212,850 last week. Claims in California fell by 3,519. There were also notable declines in Texas, Michigan, New Jersey and Pennsylvania, which more than offset a significant increase in Virginia.

The labor market is slowing only marginally, with job gains in July the second smallest since December 2020. Unemployment is hovering around levels last seen more than 50 years ago. There were 1.6 job openings for every unemployed person in June.

The claims, relative to the size of the labor market, are well below the 280,000 level that economists say would signal a significant slowdown in job growth.

Fed Minutes The July 25-26 meeting published on Wednesday showed that while policymakers acknowledged “signs that supply and demand are coming into better balance”, they judged that further progress towards balancing labor market demand and supply was needed, and they expected further easing of labor market conditions would occur over time.”

US stocks opened higher. The dollar fell against a basket of currencies. Longer-term US Treasury yields rose.

Reuters graphics

ONION PREDICTIONS BLOWN BACK

The US Federal Reserve has since March 2022 raised its benchmark overnight rate by 525 basis points to the current range of 5.25%-5.50%. Most economists believe that the rate hike cycle is likely over, a given The latest measure in inflation, although an increase cannot be ruled out at its Oct. 31-Nov. 1 policy meeting. Fed Chairman Jerome Powell’s speech at the Jackson Hole Economic Symposium next week may shed more light on the outlook for monetary policy.

Economists have scaled back their forecasts for a recession this year and are increasingly warming to the idea that the Fed can guide the economy to a “soft landing.”

The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of the August employment report. Claim payments rose slightly between the investigation period July and August.

Data next week on the number of people receiving benefits after a first week of welfare, a proxy for employment, will provide more clues about the health of the labor market in August.

So-called ongoing claims rose by 32,000 to 1.716 million in the week ended Aug. 5, the claims report showed.

At current levels, continued claims remain low by historical standards, suggesting that some laid-off workers are experiencing short periods of unemployment.

“Despite the increase over the past week, the number of remaining applicants has trended modestly lower since mid-April, suggesting that newly unemployed workers are quickly rehiring elsewhere,” said Conrad DeQuadros, senior economic adviser at Brean Capital in New York.

A separate report from the Philadelphia Fed showed that factory activity in the mid-Atlantic region rebounded in August, but companies in the region covering eastern Pennsylvania, southern New Jersey and Delaware reported a decline in employment.

They were also less optimistic about business conditions over the next six months. The Philadelphia Fed’s business conditions index rose to 12.0 this month from -13.5 in July. However, the hope likely overestimates the health of the manufacturing industry, which continues to be hampered by higher borrowing costs.

A survey this week from the New York Fed showed that business conditions in the “Empire State” remained depressed in August.

The Philadelphia Fed survey measure of employment fell to -6.0 this month from -1.0 last month. But the average workweek rebounded, suggesting that factories increased the number of hours for their current workforce. The survey’s six-month index of business conditions fell to 3.9 this month from 29.1 in July.

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

Our standards: Thomson Reuters Trust Principles.

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