WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits fell more than expected last week, suggesting that labor market conditions remain fairly tight.
Initial claims for state unemployment benefits dropped 18,000 to a seasonally adjusted 202,000 for the week ended Dec. 30. Economists polled by Reuters had forecast 216,000 claims for the latest week. Claims data tend to be volatile around this time of year because of the holidays.
They have largely bounced around in the lower end of their 194,000-265,000 range for 2023. The labor market is steadily cooling following 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022.
The unemployment rate has, however, remained below 4% as companies hoard workers following difficulties finding labor in the aftermath of the COVID-19 pandemic.
A separate report from global outplacement firm Challenger, Gray & Christmas on Thursday showed job cuts announced by U.S.-based employers dropped 24% to 34,817 in December. Planned layoffs, however, jumped 98% to 721,677 in 2023, the highest annual count since 2020. Excluding the pandemic, it was the highest tally since 2009.
Financial markets are betting the Federal Reserve will begin cutting rates as early as March. Minutes of the U.S. central bank’s December 12–13 policy meeting published on Wednesday showed officials viewed the labor market as remaining tight, but also continuing to “come into better balance.”
They also showed that “several participants noted the risk that, if labor demand were to weaken substantially further, the labor market could transition quickly from a gradual easing to a more abrupt downshift in conditions.”
The U.S. central bank held its policy rate steady in the current 5.25-5.50% range at that meeting and policymakers signaled in new economic projections that the historic monetary policy tightening engineered over the last two years is at an end and lower borrowing costs are coming in 2024.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, decreased 31,000 to 1.855 million during the week ending Dec. 23, 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.
The claims data have no bearing on the closely watched employment report for December, to be released on Friday, as they fall outside the survey period. According to a Reuters survey of economists, nonfarm payrolls likely increased by 170,000 jobs in December after rising 199,000 jobs in November.
The unemployment rate is forecast rising to 3.8% from 3.7% in November.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
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