The number of weekly jobless claims increases in the US amidst a still tight labor market

Even though the underlying trend points to a tight labor market, the number of Americans applying for new unemployment benefits claims increased more than what the experts predicted in the last week. Seeing how resilient the US jobs market is, it seems that the Federal Reserve’s interest rate hikes did not have enough strength to hold down the labor market. This strong market will keep pushing the US central bank to keep tightening monetary policy. However, we can be glad that there will be no near-term recession, as the experts predicted.

Christopher Rupkey, the chief economist at FWDBONDS in New York, believes that talking about a recession triggered by the sudden rise in unemployment claims this week would be akin to crying wolf. With the low number of layoffs, there will be no recession close by, according to Rupkey. The initial claims for unemployment benefits for the week that ended on February 4^th increased by 13,000 to a total of 196,000. This is 6,000 above the figure that was predicted by economists.

We can remove the week-to-week volatility from the measure and consider the four-week moving average of claims to get a better understanding of the current labor market trends. This figure, understandably, decreased by 2,500 to 189,250. This is the lowest value of the four-week moving average of claims seen since April 2022. The number of unadjusted claims rose by 9,628 to reach a total of 234,654 last week.

California saw a significant increase in claims, while Ohio and Illinois also saw significant increases. Georgia, New Jersey, and Texas, however, had lowered the number of claims last week. Even though there were a significant number of high-profile layoffs in the tech, finance, and housing sectors, the number of claims remains low. Several big businesses laid off staff in recent days, contributing significantly to the unemployment rate in the US.

Economists attribute the layoffs in the tech sector primarily to overhiring during the COVID-19 pandemic. They also point out how small businesses are hiring workers where tech giants have chosen to trim staff. There is much reluctance among employers to lay off talent after having such a hard time recruiting during the pandemic. Workers are scarce across several industries even today.

The reason for unemployment benefits to remain at a lower value despite these layoffs might be in the fat severance checks that were offered to workers by their employers. People can afford to ride out a few weeks before filing for unemployment benefits straightaway after losing a job. The abundance of jobs also makes it easier for people to get rehired faster.

The government uses seasonal adjustment factors which help strip out seasonal fluctuations from the data. This could be a reason why we still see a lower amount of claims. The number of people still receiving benefits after an initial week has also risen by 38,000 to 1.688 million during the week before last.