US weekly jobless claims rise as job market remains tight
The number of Americans filing new jobless claims increased last week but remains in a range indicating the U.S. job market remains tight even as the Federal Reserve is working to reduce labor demand in in an attempt to bring down inflation.
The state’s initial jobless claims rose 9,000 to a seasonally adjusted 225,000 for the week ended Dec. 24, the Labor Department said Thursday. Economists polled by Reuters had forecast 225,000 hits over the past week.
Application data has been volatile in recent weeks but remained well below the 270,000 threshold that economists see as a red flag for the labor market. A flurry of layoffs in the tech sector and interest-sensitive industries such as housing construction has yet to have a noticeable impact on requirements, as laid-off workers appear to move into new jobs with relative ease.
Federal Reserve Chairman Jerome Powell – the main architect of the central bank’s aggressive rate hikes to curb too-high inflation – said earlier this month that “it looks like we have a structural labor shortage.”
Indeed, the resilience of the labor market is at the heart of Fed policymakers, as the US economy has created an average of 392,000 new jobs per month this year, despite rapid rate hikes and growing fears of a recession next year. Officials believe this strength gives them enough room to raise interest rates further to bring down inflation, which, according to their preferred target, remains nearly three times above the 2% a year target, even though it recently showed signs of decline.
The central bank raised rates from near zero in March to the current range of 4.25% to 4.50%, and Fed officials predict it will break the 5% mark in 2023, a level not seen since 2007.
Economists believe that companies are likely to cut hiring before layoffs. Employers are generally reluctant to lay off workers after struggling to find work during the COVID-19 pandemic.
The Claims Report showed that the number of people receiving benefits after the first week of assistance rose from 41,000 to 1.710 million in the week ending December 17.
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