US weekly jobless claims rise moderately; Q4 GDP trimmed

THE number of Americans filing new claims for unemployment benefits rose moderately last week, showing no signs yet that tightening credit conditions have made a material impact on the labour market, which remains tight.

The economy grew at a solid clip in the fourth quarter, though much of the increase in output came from inventory accumulation, mostly unplanned.

Initial claims for state unemployment benefits increased by 7,000 to a seasonally adjusted 198,000 for the week ended Mar 25, 2023, the Labor Department said on Thursday (Mar 30). Economists polled by Reuters had forecast 196,000 claims for the latest week.

Claims have remained very low, bouncing around in a tight range despite high-profile layoffs in the technology industry.

Economists attributed some of the low level in claims to seasonal adjustment factors – the model that the government uses to strip out seasonal fluctuations from the data – which they said could have been affected by the Covid-19 pandemic.

However, they acknowledged that claims were still low even using alternative methods.

“While alternative seasonal adjustment approaches may suggest less upbeat figures as of late, they do not suggest particularly weak results, although momentum may be softening,” said Daniel Silver, an economist at JPMorgan.

The Labor Department said updated seasonal adjustment factors would be available next month.

With 1.9 job openings for every unemployed person in January, employers have generally been reluctant to let go of workers, and laid-off workers could be easily getting new employment. But tightening lending standards following the recent collapse of two regional banks could make it harder for households and small businesses to access credit, potentially dampening demand for labour.

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According to an analysis by Goldman Sachs, leisure and hospitality, as well as other service industries, relied heavily on bank lending. Lack of access to credit could also worsen the current tough environment for the information sector.

“Over the last six months, these two industries account for half of the plus-150,000 average overshoot in non-farm payroll growth relative to its pre-pandemic average pace,” Goldman Sachs economist Spencer Hill said in a note. “We expect slowing job growth in this sector as diminished loan availability dissuades restaurant operators and other smaller businesses from hiring new workers and opening new establishments.”

The number of people receiving benefits after an initial week of aid, a proxy for hiring, rose by 4,000 to 1.69 million during the week ended Mar 18. The so-called continuing claims covered the period during which the government surveyed households for the unemployment rate for March.

Continuing claims increased moderately between the February and March survey weeks. The unemployment rate was at 3.6 per cent in February.

Labour market resilience is helping to keep recession at bay.

The Commerce Department reported in its third estimate of fourth-quarter gross domestic product that GDP increased at a revised 2.6 per cent annualised rate last quarter.

That was revised down from the 2.7 per cent pace reported last month. Economists had expected GDP growth would be unrevised. Growth estimates for the first quarter are currently as high as a 3.2 per cent rate. REUTERS