The number of People submitting new unemployment claims decreased once more last week, indicating ongoing resilience in the labor market that could deter the Federal Reserve from boosting interest rates.
The Labor Department said on Thursday that initial claims for state unemployment benefits decreased by 2,000 to a seasonally adjusted 190,000 for the week ending February 25. Claims stayed below 200,000 for the eighth week in a row. 195,000 claims were predicted by economists surveyed by Reuters for the most recent week.
As these businesses overhired during the epidemic and were not reflective of the entire economy, economists and policymakers argue there is still no evidence that high-profile layoffs, primarily in the technology industry, have had a significant influence on the job market. Severance benefits may have discouraged some laid-off workers from making claims, according to economists.
According to Veronica Clark, an economist at Citigroup in New York, “it is plausible that initial claims might not be completely capturing” layoffs of higher-paid workers who would not be eligible for unemployment benefits due to severance or might not file for benefits for some other reason.
The government’s approach for removing seasonal changes from data, known as seasonal adjustment factors, was also seen by economists to be preventing higher claims. Towards the end of March, the seasonal adjustment variables for 2023 will be revised.
The likelihood of the Fed raising interest rates at least three more times this year, rather than just once, has increased due to the labor market’s resiliency and persistently rising inflation. Since March of last year, the U.S. central bank has increased its policy rate by 450 basis points, moving it from near zero to a range of 4.50%-4.75%, with the most of the hikes occurring between May and December.
The claims data also revealed a 5,000 decrease to 1.655 million in the number of people getting benefits after a first week of assistance. The government surveyed households to determine the unemployment rate for February within the time period covered by the so-called continuing claims, which serve as a stand-in for hiring.
Nothing changed in continuing claims between the January and February survey periods. 3.4% was the lowest unemployment rate in more than 53 years in January. Economic experts anticipate significant job creation in February, albeit at a slower rate than January’s record-breaking 517,000 jobs.