US weekly jobless claims increase slightly; Q3 GDP growth trimmed

THE number of Americans filing new claims for unemployment benefits rose just marginally last week, suggesting underlying strength in the economy as the year winds down. In a separate report, the government confirmed that economic growth accelerated in the third quarter.

Initial claims for state unemployment benefits increased by 2,000 to a seasonally adjusted 205,000 for the week ended Dec 16, the Labor Department said on Thursday (Dec 21). Economists polled by Reuters had forecast 215,000 claims for the latest week.

Though the claims data is volatile around this time of the year because of holidays, it remains consistent with a fairly healthy labour market in the US, which is expected to keep the economy from recession next year.

A survey from the Conference Board on Wednesday showed the share of consumers viewing jobs as plentiful was the highest in five months in December.

The claims data covered the week during which the government surveyed businesses for the non-farm payrolls portion of December’s employment report. Claims rose slightly between the November and December survey periods.

The economy added 199,000 jobs in November, below the monthly average of 240,000 over the past year, but higher than the 150,000 positions created in October.

The Federal Reserve held interest rates steady last week. Policymakers signalled in new economic projections that the historic monetary policy tightening engineered over the last two years is at an end, and that lower borrowing costs are coming in 2024.

Since March 2022, the US central bank has hiked its policy rate by 525 basis points to the current range of 5.25 to 5.50 per cent.

Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, could shed more light on the labour market’s fortunes in December. The so-called continuing claims slipped by 1,000 to 1.865 million during the week ended Dec 9, the claims report showed.

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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.

Economists expect the distortion will be smoothed out when the government revises the data next year. Labour market strength is fuelling consumer spending, keeping the overall economy afloat.

Meanwhile, gross domestic product increased at a 4.9 per cent annualised rate last quarter, revised down from the previously reported 5.2 per cent pace, the Commerce Department’s Bureau of Economic Analysis (BEA) said in its third estimate of third-quarter GDP.

It was still the fastest pace of expansion since the fourth quarter of 2021. Economists had expected that GDP growth would be unrevised at a rate of 5.2 per cent.

The economy, which grew at a 2.1 per cent pace in the second quarter, has been expanding at a pace far above what Fed officials regard as the non-inflationary growth rate of around 1.8 per cent. Momentum, however, appears to have faded in the final three months of the year, as consumer spending takes a breather.

Growth is also expected to be restrained by a wider trade deficit and slower pace of inventory building relative to the third quarter.

But the growth pace likely remains enough to fend off a recession, with retail sales unexpectedly rising in November and single-family housing starts and building permits scaling 1½ year highs. Growth estimates for the fourth quarter range from as low as a 1.1 per cent rate to as high as a 2.7 per cent pace.