- Weekly jobless claims rise by 13,000 to 231,000
- Current claims increase by 32,000 to 1.865 million
- Import prices fall 0.8% in October
- Manufacturing production falls 0.7%
WASHINGTON, Nov 16 (Portal) – The number of Americans filing new claims for jobless benefits rose to a three-month high last week, suggesting the job market is beginning to cool, adding to the Federal Reserve’s fight against inflation gives further impetus.
The Labor Department’s weekly jobless claims report on Thursday, the latest data on the health of the economy, also showed the number of unemployed workers rising to levels last seen two years ago. The labor market is slowing as higher interest rates curb demand, which coincides with slowing economic activity.
It added to data this week that showed easing inflation and a slowdown in consumer spending, bolstering expectations that the Fed’s monetary tightening cycle is complete.
Nevertheless, the increase in both initial and continuing claims is unlikely to indicate a significant change in labor market conditions. Economists noted that after an unprecedented surge in jobless claims early in the COVID-19 pandemic, it was difficult to adjust the data for seasonal fluctuations.
“More modest progress has been made in reducing inflation and rebalancing the labor market,” said Conrad DeQuadros, senior economic adviser at Brean Capital in New York. “We have reservations about the seasonal factors that may have been distorted by claims during the Covid period.”
Initial claims for state unemployment benefits rose by 13,000 in the week ended Nov. 11 to a seasonally adjusted 231,000, the highest level since August. Economists polled by Portal had forecast 220,000 claims for last week. Claims this year are in the middle of the range of 194,000 to 265,000.
Unadjusted claims rose by 1,713 last week to 215,874. There were increases in filings in Massachusetts and New York, which more than offset significant declines in Oregon and Georgia.
“Overall, the data suggests that while the labor market may be cooling, conditions are not particularly bad,” said Daniel Silver, an economist at JPMorgan in New York. “Initial claims data can be volatile, especially around holidays like Veterans Day, so we never want to overreact when data is only available for a week.”
Job growth slowed in October and the unemployment rate rose to 3.9%, its highest level in nearly two years. With 1.5 vacancies per unemployed person in September, conditions remain quite strict. Economists at Goldman Sachs said they did not believe the rise in the unemployment rate in October was a bad omen, noting that the rise in the jobless rate since April was due entirely to an expansion in the labor force rather than a decline in employment .
Stocks on Wall Street traded lower after Walmart (WMT.N) said Americans remained cautious about spending due to higher prices and borrowing costs.
The dollar fell against a basket of currencies. U.S. Treasury bond prices rose and yields neared two-month lows.
Portal graphics
RATE CUT EYED
According to CME Group’s FedWatch tool, financial markets are expecting a rate cut next May based on the recent string of pro-inflation data. Since March 2022, the Fed has raised its key interest rate by 525 basis points to the current range of 5.25% to 5.50%.
The number of people receiving benefits after an initial week of aid, an indicator of hiring, rose by 32,000 to 1.865 million in the week ended Nov. 4, the highest level since November 2021, the claims report showed. The so-called standing claims have increased since mid-September.
Most economists attribute the increase to difficulties in adjusting data for seasonal fluctuations rather than to weakness in the labor market. They expect this will be fixed when the government revises the data next spring.
While some agreed that seasonal adjustment was a problem, they also saw the continued increase as a sign that more unemployed people were experiencing longer periods of unemployment.
“In the near term, there is little prospect of a revival in labor demand as interest rates are expected to remain higher for longer,” said Kurt Rankin, senior economist at PNC Financial in Pittsburgh, Pennsylvania. “Weakening consumer demand as we enter 2024 should therefore place upward pressure on jobless claims going forward as those facing layoffs and new job seekers find fewer readily available opportunities.”
The stream of encouraging inflation readings was added to Thursday by a separate report from the Labor Department’s Bureau of Labor Statistics showing that import prices fell 0.8% in October, the most in seven months, amid a broad decline in the cost of goods. Import prices rose 0.4% in September.
Economists had forecast a 0.3% decline in import prices excluding tariffs. In the 12 months to October, import prices fell 2.0%, after falling 1.5% in September. Annual import prices have now fallen for nine months in a row.
Inflation meter
But production was hit by strikes by the United Auto Workers (UAW) union against Detroit’s Big Three automakers, which led to a decline in auto production in October
Manufacturing output fell 0.7% last month after rising 0.2% in September, the Fed said in a third report. Economists had forecast a 0.3% drop in factory output. Factory output fell 1.7% year-on-year in October.
Production of motor vehicles and parts fell 10.0%, after falling 0.5% in September. The UAW has ended its labor disputes at factories owned by General Motors (GM.N), Ford (FN) and Chrysler parent Stellantis (STLAM.MI). Excluding motor vehicles and parts, manufacturing output rose slightly by 0.1%.
Philly Fed
Manufacturing, which accounts for 11.1% of the economy, continues to be hurt by the higher rates. A fourth report from the Philadelphia Fed showed that factory activity in the Mid-Atlantic region continued to decline in November, although the pace of the decline slowed starting in October.
Factories in the region were also optimistic about the business prospects for the next six months.
“Overall, we still see signs that manufacturing activity, particularly in durable goods, has bottomed out and is picking up, although this is unlikely to last in an environment of generally weaker demand,” said Veronica Clark, economist at Citigroup New York.
Reporting by Lucia Mutikani; Edited by Chizu Nomiyama and Andrea Ricci
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