Categories
Audio Sources - Full Text Articles

U.S. labor market still tight; housing mired in recession

Advertisements | Advertising at The News And Times | advertising-newsandtimes.com | WE CONNECT!
Listen to this article
2023-01-19T18:18:37Z

The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, pointing to another month of solid job growth and continued labor market tightness despite efforts by the Federal Reserve to cool demand for workers.

The weekly jobless claims report from the Labor Department on Thursday likely does not change expectations that the U.S. central bank will further scale back the size of its interest rate increases next month. It, however, poured cold water on financial market hopes that the Fed would pause its fastest rate hiking cycle since the 1980s, which had been fanned by a slump in retail sales in December and a retreat in inflation.

“It is a frustrating reminder for the Fed that the labor market remains tight as employers hold onto workers,” said Matthew Martin, a U.S. economist at Oxford Economics in New York. “We don’t expect a spike in initial jobless claims even as the economy slows.”

Initial claims for state unemployment benefits dropped 15,000 to a seasonally adjusted 190,000 for the week ended Jan. 14, the lowest level since September. Economists polled by Reuters had forecast 214,000 claims for the latest week.

Part of the third straight weekly drop in claims likely reflected continuing challenges in adjusting the data for seasonal fluctuations at the start of the year.

But through the seasonal volatility, claims have remained at levels consistent with a tight labor market even as layoffs have accelerated in the technology industry and interest rate-sensitive sectors like finance and housing.

Unadjusted claims dropped by 53,582 to 285,575 last week. There was a jump in claims for California, which were estimated, likely reflecting disruptions caused by recent severe weather in the state. That was offset by sizeable declines in Georgia, Michigan, New Jersey, Wisconsin, New York and Texas.

Microsoft Corp (MSFT.O) said on Wednesday it would eliminate 10,000 jobs, joining cloud-computing rival Amazon.com (AMZN.O), which is pushing ahead with a plan to lay off 18,000 employees.

Economists cautioned against reading the technology layoffs as flagging a deterioration in labor market conditions, arguing that these companies were right-sizing after over-hiring during the COVID-19 pandemic.

“The tech sector is just getting back to where they were in 2020 or 2021, which I don’t think is a bad situation,” said John Blevins, a guest lecturer at Cornell University’s SC Johnson College of Business. “It’s still a huge workforce.”

Outside the technology industry, economists say companies are generally reluctant to send workers home after difficulties finding labor during the pandemic. They expect companies to cut back on hiring before resorting to layoffs.

Indeed, the Fed’s latest “Beige Book” report on Wednesday showed that “many firms hesitated to lay off employees even as demand for their goods and services slowed and planned to reduce headcount through attrition if needed.”

Stocks on Wall Street fell. The dollar was steady against a basket of currencies. U.S. Treasury yields rose.

The Fed last year raised its policy rate by 425 basis points from near zero to the current 4.25%-4.50% range, the highest since late 2007. In December, it projected at least an additional 75 basis points of hikes in borrowing costs by the end of 2023.

Financial markets have priced in a 25-basis point rate increase at the Fed’s Jan. 31-Feb. 1 meeting, according to CME’s FedWatch Tool.

The claims data released on Thursday covered the period during which the government surveyed businesses for the nonfarm payrolls component of January’s employment report.

Claims decreased between the December and January survey weeks. The economy added 223,000 jobs in December.

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 employment growth in January.

In the week ending Jan. 7, the so-called continuing claims rose 17,000 to 1.647 million, the claims report showed. That suggests some unemployed could be experiencing difficulties finding work. While the labor market continues to defy expectations, recession risks are rising.

A separate report from the Commerce Department on Thursday showed single-family homebuilding rebounded in December, but permits for future construction dropped to more than a 2-1/2-year low, pointing to weakness ahead as tighter monetary policy strangles the housing market.

Single-family housing starts, which account for the bulk of homebuilding, increased 11.3% to a seasonally adjusted annual rate of 909,000 units last month, the highest level since August. Starts for housing projects with five units or more tumbled 18.9% to a rate of 463,000 units.

Single-family homebuilding increased in the Northeast, South and West, but fell in the Midwest. Overall housing starts decreased 1.4% to a rate of 1.382 million units last month. Homebuilding fell 3.0% in 2022.

Single-family building permits declined 6.5% to a rate of 730,000 units, the lowest level since April 2020. Outside the pandemic plunge, these permits were the lowest since February 2016. Building permits for housing projects with five units or more increased 7.1% to a rate of 555,000 units.

Though the single-family homebuilding backlog decreased to the lowest level since March 2021, the completions rate fell sharply. The inventory of single-family housing under construction rose modestly. Residential investment likely contracted for the seventh consecutive quarter, which would be the longest such stretch since the collapse of the housing bubble triggered the Great Recession.

News on manufacturing was equally gloomy. A survey from the Philadelphia Fed showed factory activity in the mid-Atlantic region remaining depressed this month. It added to reports this week showing manufacturing in New York state plunging in January to levels last seen in May 2020, and national factory production posting its biggest drop in nearly two years in December.

“The increasingly darkening cloud of weakening economic data has a silver lining, a persistently strong labor market,” said José Torres, senior economist at Interactive Brokers in Miami.

Related Galleries:

People line up outside Kentucky Career Center prior to its opening to find assistance with their unemployment claims in Frankfort, Kentucky, U.S. June 18, 2020. REUTERS/Bryan Woolston

Houses are seen in Livingston Square by Pulte Homes, a construction of the PulteGroup, in Livingston, New Jersey, U.S., May 23, 2022. REUTERS/Andrew Kelly


Advertisements | Advertising at The News And Times | advertising-newsandtimes.com | WE CONNECT!