WASHINGTON: The number of Americans filing new claims for unemployment benefits unexpectedly fell last week as demand for labor remained strong, helping shore up the economy amid rising interest rates and tightening financial conditions.
On Thursday the Labor Department’s weekly unemployment claims report, the most timely data on the health of the economy, also showed the state’s jobless benefits roll falling to its lowest level since 1969 in the second half of May.
The Federal Reserve’s aggressive monetary policy stance as it fights high inflation has fueled fears of a recession. While other Thursday data showed private payrolls grew much less than expected in May, most likely because of labor shortages. There were more than 11 million job opportunities at the end of April. The US central bank is trying to reduce demand for labor, without raising the unemployment rate too high.
“The pace of job openings is slowing across the country, but some workers are actually losing their jobs,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “It’s not a soft-landing or hard-landing for the economy just yet. The company layoffs show no sign that the labor market isn’t loosening up as much as Fed officials were expecting.”
Initial claims for state unemployment benefits fell 11,000 to a seasonally adjusted 200,000 for the week ended May 28. Economists polled by Reuters had forecast 210,000 applications for the latest week.
There were major declines in claims in Pennsylvania, Kentucky, Georgia and Florida, which offset a jump in California, with significant increases in Mississippi and New York.
The claims are running rampant since hitting a 53-year low of more than 166,000 in March.
Labor demand remains strong, though the Fed’s beige book showed Wednesday that “one district clearly reported that the pace of job growth has slowed,” and that “a few firms in most coastal districts have seen a freeze.” Or mentioned hiring other signals that the tightness of the market was beginning to relax.”
shortage of workers
But the government also reported that there were 11.4 million job opportunities at the end of April. While the job-workers gap fell by 3.6% of the labor force in March, it remained much higher at 3.3% in April.
Weak worker productivity could make the Fed’s fight against inflation difficult. In another report on Thursday, the Labor Department confirmed that productivity in the first quarter fell at its fastest pace since 1947, while unit labor cost growth accelerated.
Economists say the claims would need to rise above 300,000 for the hot jobs market to cool. Labor market strength was reinforced by a third report on Thursday by global outplacement firm Challenger, Gray & Christmas, which showed layoffs announced by US-based companies fell 14.7% to 20,712 in May.
So far this year, employers have announced 100,694 job cuts, down 48% from the same period in 2021. This is the lowest recorded in January-May since Challenger began tracking monthly job cut announcements in 1993.
It oversaw the ADP National Employment Report, which showed Thursday that private payrolls grew by 128,000 jobs last month after rising 202,000 in April. Economists had estimated that the private payroll would increase by 300,000 jobs.
The ADP Report is developed jointly with Moody’s Analytics. However, because of methodological differences, the department’s Bureau of Labor Statistics (BLS) employment reports have a poor record of predicting private payroll counts.
“The ADP data suggests that job growth is slowing, which is in line with our expectations for the labor market at a very high level,” said Daniel Silver, an economist at JPMorgan in New York. “But we know that the ADP report is not always a reliable predictor of BLS data, so it is unclear whether BLS data will be as weak as the May print of the ADP report.”
The government’s closely watched employment report on Friday expects strong job growth to continue in May.
Non-farm wages probably increased by 325,000 jobs last month, according to a Reuters survey of economists. The economy created 428,000 jobs in April, marking a job gain of more than 400,000 in 12 consecutive months.
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