The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting the labor market remains strong despite slowing domestic demand amid stiff interest rate hikes from the Federal Reserve to tame inflation.
Initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 217,000 for the week ended Oct. 29, the Labor Department said on Thursday. Data for the prior week was revised to show 1,000 more applications filed than previously reported. Economists polled by Reuters had forecast 220,000 claims for the latest week.
Though there has been an increase in layoffs in interest rate-sensitive sectors of the economy like finance, technology and housing, employers have generally been hoarding workers as labor remains scarce in some service industries.
The U.S. central bank on Wednesday raised its policy rate by another three-quarters of a percentage point to a range of 3.75% to 4.00%, but signaled future increases in borrowing costs could be made in smaller steps to account for the “cumulative tightening of monetary policy” it has enacted so far.
It was the fourth straight 75-basis-point rate hike as the Fed fights to bring inflation back to its 2% target. Fed Chair Jerome Powell told reporters that the labor market “remains extremely tight,” and “continues to be out of balance.”
Job openings unexpectedly rose in September, with 1.9 job openings for every unemployed person at the end of that month.
The claims report also showed the number of people receiving benefits after an initial week of aid, a proxy for hiring, rose 47,000 to 1.485 million in the week ending Oct. 22. The data has no bearing on October’s employment report, scheduled to be released on Friday, as it falls outside the survey period.
According to a Reuters survey of economists, nonfarm payrolls likely increased by 200,000 jobs in October. The economy created 263,000 jobs in September. Domestic demand barely grew in the third quarter even as gross domestic product rebounded after contracting in the first half of the year, largely driven by a shrinking trade deficit.
Though unemployment rolls remain small, there has been an uptick in layoffs. A separate report from global outplacement firm Challenger, Gray & Christmas on Thursday showed job cuts announced by U.S.-based employers increased 13% to 33,843 in October, the highest since February 2021.
There was a jump in planned layoffs in construction, technology, industrial goods and warehousing industries.
“We are beginning to see more job cut activity in the fourth quarter, historically when the bulk of cuts occur, as companies finalize budgets and plans,” said Andrew Challenger, senior vice president at Challenger, Gray & Christmas.
Still, announced layoffs so far this year are down 16% to 243,338, the lowest January-October total since Challenger began tracking the series in 1993. Employers announced plans to hire 237,380 workers last month compared to 380,014 in September.
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