US jobless claims hit three-month high; business equipment orders up sharply
APPLICATIONS for US unemployment benefits rose last week to a three-month high amid a wave of layoffs at technology companies, a sign of cooling in a tight labour market. Orders placed with US factories for business equipment rebounded in October, suggesting capital spending plans are holding up in the face of higher borrowing costs and broader economic uncertainty.
Initial unemployment claims increased by 17,000 to 240,000 in the week ended Nov 19, Labor Department data showed on Wednesday (Nov 23). The median estimate in a Bloomberg survey of economists called for 225,000.
Continuing claims, which include people who have already received unemployment benefits for a week or more, rose by 48,000 to 1.55 million in the week ended Nov 12, the highest since March. That was also the sixth weekly increase in a row.
Economists have been watching continuing claims more closely in recent weeks because they have been warning indicators of recessions in the past. Although the gauge is up from lows in May this year, it’s still well below last year’s levels and historical averages.
The Federal Reserve (Fed) has embarked on its most aggressive tightening campaign since the 1980s this year in an effort to tame the highest inflation in a generation. The steep interest-rate hikes have had an impact on sectors such as housing and construction, but overall the labour market has remained robust.
The list of high-profile technology companies announcing job cuts or hiring freezes has been growing, from Amazon.com to Facebook parent company Meta and personal-computer maker HP, which said this week it would eliminate as many as 6,000 jobs.
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The mounting layoffs in the sector don’t necessarily portend weakness in the broader market because many tech companies had ramped up hiring during the pandemic-era e-commerce boom. Still, other industries aren’t immune. Even FedEx is furloughing workers in its freight unit ahead of what’s usually the busiest season of the year for the company.
The four-week moving average, which smooths out volatility from week to week, increased to 226,750.
On an unadjusted basis, initial claims rose by about 48,000 to almost 248,200 last week. The increases were spread across the states, with California, Illinois and Georgia among the largest ones.
Meanwhile, the value of core capital goods orders, a proxy for investment in equipment that excludes aircraft and military hardware, rose 0.7 per cent last month after a downwardly revised 0.8 per cent decline in September, Commerce Department figures showed on Wednesday. The data aren’t adjusted for inflation.
Core capital goods shipments, a figure that is used to help calculate equipment investment in the government’s gross domestic product report, jumped 1.3 per cent, the most since the start of the year. That suggests a solid start to fourth-quarter GDP. The preliminary estimate will be released in late January.
The figures suggest companies are largely adhering to capital spending plans as they seek to improve productivity and help counter lingering cost pressures. At the same time, a Federal Reserve that’s poised to deliver more interest rate hikes in coming months risks causing a pullback in investment.
Bookings for all durable goods – items meant to last at least three years – rose 1 per cent in October, the most in four months and bolstered by transportation equipment and military aircraft. Excluding transportation equipment, durable goods orders rose 0.5 per cent after a sharp drop the previous month.
American manufacturers have benefited from largely resilient consumer spending for merchandise at home, but a deteriorating global economic backdrop will restrain overseas demand.
The median estimates in a Bloomberg survey of economists was for core capital goods orders to flatline and overall bookings for durable goods to rise 0.4 per cent.
Survey data in recent weeks have generally pointed to a loss of momentum. The Institute for Supply Management’s gauge of factory activity neared stagnation in October as orders contracted.
Several regional Fed bank manufacturing surveys pointed to shrinking business activity last month, a downshift that lingered into November in areas like those covered by the Philadelphia and Richmond Fed banks.
The Commerce Department’s report showed bookings for commercial aircraft, which are volatile from month to month, increased 7.4 per cent. Boeing reported 122 orders in October, up from 96 in September. While often helpful to compare the two, aircraft orders are volatile and the government data don’t always correlate with the planemaker’s monthly figures.
Orders for military aircraft, which are volatile on a monthly basis, increased 21.7 per cent, recovering much of the prior month’s drop. Total defence capital goods rose.
The report also showed unfilled orders for all durable goods increased, while inventories edged up. BLOOMBERG
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