- Weekly jobless claims fall 20,000 to 201,000
- Continuing claims drop 21,000 to 1.662 million
- Existing home sales slip 0.7% in August
- Median house price increases 3.9% from year ago
WASHINGTON, Sept 21 (Reuters) – The number of Americans filing new claims for unemployment benefits dropped to an eight-month low last week, pointing to persistent labor market tightness even as job growth is cooling.
The report from the Labor Department on Thursday also showed unemployment rolls in early September were the smallest since January. It was published a day after the Federal Reserve held interest rates steady but stiffened its hawkish stance, with a further rate increase projected by the end of the year and monetary policy to be kept significantly tighter through 2024 than previously expected.
“This economy is just not showing any sign of slowing down which hints that inflation will not be coming back down to target,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “The Fed was wise to keep another interest rate hike in their back pockets just in case, and it now looks like another rate hike is warranted.”
Initial claims for state unemployment benefits dropped 20,000 to a seasonally adjusted 201,000 for the week ended Sept. 16, the lowest level since January. Economists polled by Reuters had forecast 225,000 claims for the latest week. Claims are in the lower end of their 194,000-265,000 range for this year.
Claims could, however, increase in the coming weeks as a partial strike by the United Auto Workers (UAW) union forces automobile manufacturers to temporarily lay off workers because of shortages of some materials.
The UAW last week launched a targeted strike against Ford (F.N), GM (GM.N) and Stellantis (STLAM.MI), impacting one assembly plant at each company. It has threatened to broaden the work stoppages, which for now only involve about 12,700 of the affected 146,000 UAW members.
Though striking workers are not eligible for unemployment benefits, the walkout has snarled supply chains.
Ford has furloughed 600 workers who are not on strike, while GM expected to halt operations at its Kansas car plant, affecting 2,000 workers. Chrysler parent Stellantis said it would temporarily lay off 68 employees in Ohio and expects to furlough another 300 workers in Indiana.
Unadjusted claims rose by only 67 to 175,661 last week. There were notable declines in filings in Indiana and California, which mostly offset sizeable increases in South Carolina, New York and Georgia.
Fed Chair Jerome Powell said on Wednesday that “the labor market remains tight, but supply and demand conditions continue to come into better balance.”
Employment growth has been slowing and job openings falling. Labor market resilience is propping up the economy even as recession fears linger. The leading indicator, a gauge of future U.S. economic activity, fell 0.4% in August after dropping 0.3% in July, the Conference Board said in a second report on Thursday.
It has dropped for 17 straight months. Since March 2022, the U.S. central bank has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range.
The claims data together with the Fed’s hawkish stance pushed stocks on Wall street lower. The dollar gained versus a basket of currencies. U.S. Treasury prices fell, with the yield on the benchmark 10-year bond rising to a nearly 16-year high.
The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of September’s employment report.
The strike is unlikely to have an impact on payrolls as it started towards the end of the survey week. Workers most likely received pay for that week. Claims fell between the August and September survey period.
Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will offer more clues on the state of the labor market in September.
The so-called continuing claims declined 21,000 to 1.662 million during the week ending Sept. 9, also the lowest level since January, the claims report showed. That suggests laid-off workers are quickly finding employment.
While the labor market remains unbowed, the housing market is faltering after showing signs of stabilizing earlier this year as mortgage rates resume their upward trend in tandem with the 10-year Treasury note, which has spiked on worries soaring oil prices could hamper the Fed’s fight against inflation.
Existing home sales slipped 0.7% last month to a seasonally adjusted annual rate of 4.04 million units, the National Association of Realtors said in a third report.
Existing home sales are counted at the closing of a contract. Last month’s sales likely reflected contracts signed in July, before the recent run-up in mortgage rates, which lifted the rate on the popular 30-year fixed mortgage above 7%.
Home sales last month were restrained by persistently tight supply, with inventory falling 14.1% from a year earlier to 1.1 million, the lowest on record for any August.
As a result, the median house price accelerated 3.9% from a year earlier to $407,100, the fourth-highest reading. It hit a record $413,000 in June 2022.
“The prospects for improved sales in the coming months look bleak,” said Ben Ayers, senior economist at Nationwide in Columbus, Ohio. “2023 could end in a whimper for the real estate sector as any substantial pull-back in rates is likely far off into 2024.”
News on manufacturing was downbeat. Manufacturing together with housing have borne the brunt of the Fed’s aggressive monetary policy tightening.
A fourth report from the Philadelphia Fed showed factory activity in the mid-Atlantic region slumped in September. Firms in the region that covers eastern Pennsylvania, southern New Jersey and Delaware reported decreases in new orders and shipments. They continued to report a decline in employment.
The Philadelphia Fed’s business conditions index fell to -13.5 this month from 12.0 in August. It was the index’s 14th negative reading in the past 16 months.
“Softer demand for goods and higher borrowing costs are hurdles for activity,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. “But re-shoring of supply chains, infrastructure projects and a stabilization in demand could provide support to manufacturing output over time.”
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama, Paul Simao and Andrea Ricci
Our Standards: The Thomson Reuters Trust Principles.
- Weekly jobless claims drop 9,000 to 228,000
- Continuing claims increase 33,000 to 1.754 million
- Existing home sales fall 3.3% in June
WASHINGTON, July 20 (Reuters) – The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, touching the lowest level in two months amid ongoing labor market tightness and defying efforts by the Federal Reserve to slow demand.
The second straight weekly decline in claims reported by the Labor Department on Thursday raised cautious optimism that the economy could avoid a dreaded recession this year. It followed recent data showing inflation subsiding in June. Labor market strength is also supporting wage growth, helping consumer spending to continue plodding along.
“The warning clouds of recession have scattered and company layoffs have come back down,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “If there is a recession out there, it is one without too many job losses. We don’t know of any such recessions in economic history so there must not be one looming.”
Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 228,000 for the week ended July 15, the lowest level since mid-May. Economists polled by Reuters had forecast 242,000 claims for the latest week.
Unadjusted claims fell by 326 to 257,976 last week. Claims surged by 5,059 in California and increased by 4,616 in Georgia.
There were also notable rises in filings in South Carolina and Oregon, which were more than offset by significant declines in Michigan, Kentucky, Indiana, New York, New Jersey, Iowa and Illinois.
Last week’s drop in claims was likely exaggerated by difficulties adjusting the data for seasonal patterns.
“The seasonal adjustment factor for this week anticipated a modest increase, reflecting the fact that initial filings tend to rise in the second full week of July each year,” said Lou Crandall, chief economist at Wrightson ICAP in Brooklyn, New York. “However, that tendency only applies to weeks ending between July 8 and July 13.”
Automakers typically idle plants in July to retool for new models. But these temporary plant closures do not always happen around the same time, which could throw off the model that the government uses to strip out seasonal fluctuations from the data.
Claims, relative to the size of the labor market, are way below the 280,000 level that economists say would signal a significant slowdown in job growth. The labor market remains tight as companies hoard workers after struggling to find labor during the COVID-19 pandemic, despite the economy slowing because of the Fed’s hefty interest rate increases.
The U.S. central bank is expected to resume hiking rates next Wednesday after skipping an increase in June. The Fed has raised its policy rate by 500 basis points since March 2022, when it kicked off its fastest monetary policy tightening cycle in more than 40 years.
“Many employers are reluctant to reduce headcount despite a slower economy, since the labor market is very tight, which might make rehiring difficult if growth picks up in six or twelve months,” said Bill Adams, chief economist at Comerica Bank in Dallas.
Economists shrugged off a separate report from the Conference Board showing its Leading Economic Index, a gauge of future U.S. economic activity, dropped for the 15th straight month in June, the longest such streak since 2007-08, when the economy was in the midst of the Great Recession.
“However, with most of the weakness in a few sentiment-based indicators, the recession signal is not as strong as it appears,” said Michael Pearce, lead U.S. economist at Oxford Economics in New York.
Stocks on Wall Street were mixed. The dollar rose against a basket of currencies. U.S. Treasury prices fell.
The claims data covered the week during which the government surveyed businesses for the nonfarm payrolls component of July’s employment report. Claims fell during the June and July survey weeks. The economy added 209,000 jobs in June.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 33,000 to 1.754 million during the week ending July 8, the claims report showed.
At current levels, the so-called continuing claims are low by historical standards, indicating that some laid-off workers are quickly finding work.
While the labor market remains resilient, housing and manufacturing continue to struggle. A third report from the National Association of Realtors showed existing home sales fell 3.3% in June to a seasonally adjusted annual rate of 4.16 million units, the lowest level since January.
A perennial shortage of houses on the market and higher mortgage rates are weighing on sales. With supply tight, house prices are rising again on a monthly basis. This together with the average rate on the popular 30-year fixed mortgage just under 7%, according to data from mortgage finance agency Freddie Mac, could price first-time buyers out of the market.
Most homeowners have mortgage rates under 5%, meaning they have no incentive to sell. Last month’s sales pace was the weakest for any June since 2009, during the sub-prime mortgage crisis.
“Perhaps stabilizing prices will be enough to convince more owners to put their homes on the market, but it’s likely that the fate of both existing home inventories and mortgage rates will remain linked for the foreseeable future,” said Erik Johnson, a senior economist at BMO Capital Markets in Toronto.
A fourth report from the Philadelphia Fed showed factory activity in the mid-Atlantic region still subdued in July, but manufacturers were more upbeat about business conditions over the next six months.
“Softer demand for goods and higher borrowing costs continue to be hurdles,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in New York.
“But re-shoring of supply chains, infrastructure projects and a stabilization in rates and demand could provide support to manufacturing activity over time.”
Reporting by Lucia Mutikani; Additional reporting by Safiyah Riddle in New York; Editing by Paul Simao and Andrea Ricci
Our Standards: The Thomson Reuters Trust Principles.
- Weekly jobless claims fall 1,000 to 191,000
- Continuing claims increase 14,000 to 1.694 million
- New home sales rise 1.1% in February
WASHINGTON, March 23 (Reuters) – The number of Americans filing new claims for unemployment benefits edged down last week, showing no signs yet that the recent financial market turbulence following the failure of two regional banks was having an impact on the economy.
The unexpected dip in claims reported by the Labor Department on Thursday suggested March could be another month of solid job growth. The weekly unemployment claims report is the most timely data on the economy’s health.
Persistently tight labor market conditions have left some economists expecting the Federal Reserve would raise interest rates two more times this year, despite the U.S. central bank signaling on Wednesday that it was on the verge of pausing its monetary policy tightening campaign.
“A week after the banking panic began, the labor market is steady as a rock with no new layoffs nationwide,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “Credit conditions may tighten as banks grow more cautious, but it could be weeks or months before that translates into a material slowdown in real economic activity.”
Initial claims for state unemployment benefits fell 1,000 to a seasonally adjusted 191,000 for the week ended March 18.
Economists polled by Reuters had forecast 197,000 claims for the latest week. Claims have bounced around in a tight range this year, remaining very low by historical standards, despite a rush of layoffs by major technology companies.
Economists will be watching to see if this trend persists when the government updates the seasonal adjustment factors, the model it uses to strip out seasonal fluctuations from the data, at the beginning of April.
Unadjusted claims dropped 4,659 to 213,425 last week. A jump in filings in Indiana and an increase in Massachusetts were offset by decreases in California, Illinois and New York.
With 1.9 job openings for every unemployed person in January, employers are generally reluctant to let go of workers.
Stocks on Wall Street were trading higher. The dollar fell versus a basket of currencies. U.S. Treasury yields were mixed.
TIGHTENING CREDIT CONDITIONS
Labor market conditions could loosen, especially in the wake of the collapse of Silicon Valley Bank in California and Signature Bank in New York. Financial conditions have tightened, which could cause banks to become more strict in extending credit, potentially impacting households and small businesses, who have been the main drivers of job growth.
That was acknowledged by the Federal Reserve, which on Wednesday raised its benchmark overnight lending rate by a quarter of a percentage point. The U.S. central bank has hiked its policy rate by 475 basis points since last March from near-zero to the current 4.75%-5.00% range.
Fed Chair Jerome Powell told reporters that “the events of the last two weeks are likely to result in some tightening of credit conditions for households and businesses, and thereby weigh on demand on the labor market and inflation.”
The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls portion of March’s employment report.
Claims were little changed between the February and March survey weeks, potentially hinting at another month of strong payrolls gains. The economy created 311,000 jobs in February after adding 504,000 in January.
Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will shed more light on the health of the labor market in March.
The so-called continuing claims increased 14,000 to 1.694 million during the week ending March 11, the claims report showed. Continuing claims have averaged 1.674 million this year, below their pre-pandemic average, indicating some laid off workers could be readily finding new work.
“Tight labor market conditions are a key reason we expect the Fed to raise rates by 25 basis points at both the May and June meetings,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics. “But the Fed will proceed more cautiously given the recent stress in the banking system and its uncertain impact on the economy.”
The housing market, which has borne the brunt of the Fed’s aggressive rate hikes, is showing signs of stabilizing at very low levels. New single-family home sales rose 1.1% to a seasonally adjusted annual rate of 640,000 units in February, the highest level since August, the Commerce Department said in a separate report.
New home sales are, however, very volatile on a month-on-month basis. They have now increased for three straight months.
Economists had forecast new home sales, which account for a small share of U.S. home sales, falling to a rate of 650,000 units. The surprise gain was despite mortgage rates rising from early February through early March after mostly falling since November, according to data from mortgage finance agency Freddie Mac. Monthly sales rose in the South and West. They fell in the Midwest and plunged 40.0% in the Northeast.
Sales were down 19.0% on a year-on-year basis in February. The median new house price in February was $438,200, a 2.5% rise from a year ago.
Data this week showed sales of previously owned homes rebounding for the first time in a year in February. Homebuilder sentiment improved for a third straight month in March, while single-family housing starts and building permits rose in February. Nevertheless, the housing market is not out of the woods yet. Tighter lending standards could make it harder for prospective homebuyers to borrow.
“At a minimum the decline in housing activity has slowed significantly and the inventory situation looks manageable,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
Our Standards: The Thomson Reuters Trust Principles.