According to the Labor Department, the number of Americans filing new claims for unemployment benefits decreased by 9,000 to a seasonally adjusted 218,000 for the week ended Feb. 3. This surpasses the expectations of economists, who had predicted 220,000 claims for the latest week. This suggests a strong underlying labor market, despite a recent increase in layoffs. Claims are relatively stable compared to the same period last year, despite the recent high-profile layoffs, particularly in the technology and media industries.
Employers are hesitant to lay off workers due to challenges in finding labor during and after the COVID-19 pandemic. Experts also attribute this trend to rising worker productivity, marked by consistent growth in excess of a 3% annualized pace for three straight quarters, and decreasing labor costs, which are encouraging companies to maintain their workforces. In January, the government reported an increase of 353,000 jobs in nonfarm payrolls, with the unemployment rate remaining steady at 3.7%. The sustained strength of the labor market has caused financial markets to lower their expectations of the first interest rate cut from the Federal Reserve to May from March.
On Wednesday, U.S. central bank officials indicated that they were not in a rush to reduce borrowing costs until they were confident inflation was moving toward the Fed’s 2% target. Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25% to 5.50% range. The claims report also indicated that the number of people receiving benefits after an initial week of aid, which serves as a proxy for hiring, decreased by 23,000 to 1.871 million during the week ending Jan. 27.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
