The number of Americans filing new claims for unemployment benefits increased less than expected last week as the labour market continues to gradually slow amid cooling demand.
Initial claims for state unemployment benefits rose 1,000 to a seasonally adjusted 220,000 for the week ended Dec 2, the Labor Department said on Thursday. Economists polled by Reuters had forecast 222,000 claims for the latest week.
Claims data are volatile around this time of the year because of holidays, making it harder to get a clear signal on the labour market.
Nonetheless, the labour market is slowing, with the government reporting this week that there were 1.34 job openings for every unemployed person in October, the lowest since August 2021. Demand for labour is cooling in tandem with the economy, curbed by higher interest rates.
A separate report from global outplacement firm Challenger, Gray & Christmas on Thursday showed US-based employers announced 45,510 job cuts in November, up 24% from October. But planned layoffs dropped 41% compared to a year ago.
Loosening labour market conditions together with subsiding inflation have led financial markets to conclude that the Federal Reserve is likely done hiking rates in the current cycle. Financial markets are anticipating a rate cut as early as the first quarter, according to CME Group’s FedWatch Tool.
The US central bank is expected to leave rates unchanged next Wednesday. Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25%-5.50% range.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, dropped 64,000 to 1.861 million during the week ending Nov 25, the claims report showed.
The so-called continuing claims have mostly increased since mid-September, blamed largely on difficulties adjusting the data for seasonal fluctuations after an unprecedented surge in filings for benefits early in the Covid-19 pandemic.
Economists at Goldman Sachs have estimated that seasonal distortions accounted for at least 269,000 of the increase in continuing claims since early September, and expected them to raise the level by an additional 125,000 by next March.
“The jobs market has softened a little more than recent initial claims readings might suggest, but the 15% surge in continuing claims since Labor Day vastly overstates the deterioration,” said Lou Crandall, chief economist at Wrightson ICAP in New York. “The sustained increase in the reported number of beneficiaries reflects seasonal adjustment distortions that will be smoothed out in future revisions.”
The claims data have no bearing on November’s employment report scheduled to be released on Friday as they fall outside the survey period. Nonfarm payrolls are estimated to have increased by 180,000 jobs in November, according to a Reuters survey of economists, boosted by the return of about 25,300 striking United Auto Workers union members.
The economy created 150,000 jobs in October. The unemployment rate is forecast unchanged at 3.9%.