US weekly jobless claims decline further

The number of Americans filing new claims for unemployment fell again last week, pointing to sustained labour market strength that could keep the Federal Reserve raising interest rates.

Initial claims for state unemployment benefits dropped 2,000 to a seasonally adjusted 190,000 for the week ended Feb 25, the Labor Department said on Thursday (Mar 2). It was the seventh straight week that claims remained below 200,000. Economists polled by Reuters had forecast 195,000 claims for the latest week.

There is still no sign that high-profile layoffs, mostly in the technology sector, have had a material impact on the labour market, with economists and policymakers saying these companies over-hired during the pandemic and were not representative of the overall economy. Economists also speculate that severance packages were keeping some laid off workers from filing claims.

“It is possible that initial claims might not be fully capturing layoffs of higher-paid workers who might not qualify for unemployment benefits based on severance or might not file for benefits for some other reason,” said Veronica Clark, an economist at Citigroup in New York.

Economists also believed that seasonal adjustment factors, the model the government uses to strip out seasonal fluctuations from the data, were keeping claims lower. The seasonal adjustment factors for 2023 will be updated at the end of March.

Labour market resilience and stubbornly high inflation have increased the odds of the Fed raising interest rates at least three more times this year, instead of twice. The US central bank has hiked its policy rate by 450 basis points since last March from near zero to a 4.50 per cent-4.75 per cent range, with the bulk of the increases between May and December.

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The number of people receiving benefits after an initial week of aid fell 5,000 to 1.655 million during the week ending Feb 18, the claims report also showed. The so-called continuing claims, a proxy for hiring, covered the period during which the government surveyed households for February’s unemployment rate.

Continuing claims were little changed between the January and February survey periods. The unemployment rate at 3.4 per cent in January was the lowest in more than 53 years. Economists expect strong employment growth in February, though the pace probably slowed from January’s blockbuster 517,000 jobs. REUTERS