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U.S. weekly jobless claims at three-month low; layoffs drop in December

2023-01-05T13:50:21Z

Signage for a job fair is seen on 5th Avenue after the release of the jobs report in Manhattan, New York City, U.S., September 3, 2021. REUTERS/Andrew Kelly

The number of Americans filing new claims for unemployment benefits dropped to a three-month low last week while layoffs fell 43% in December, pointing to tight labor market that could require the Federal Reserve to keep hiking interest rates.

Initial claims for state unemployment benefits decreased 19,000 to a seasonally adjusted 204,000 for the week ended Dec. 31, the lowest level since the end of September, the Labor Department said on Thursday. Economists polled by Reuters had forecast 225,000 claims for the latest week.

Volatility around the year-end holidays has injected some noise into the claims data. Through the volatility, claims have remained at very low levels despite a raft of layoffs in the technology sector and interest-rate sensitive industries like housing and finance.

Economists speculated that severance packages and still-strong demand for labor, which made it easier for laid off workers to get another job, were keeping claims low. They also say companies are likely to slow hiring before embarking on layoffs after struggling to find labor during the pandemic.

The Labor Department reported on Wednesday that there were 10.458 million job openings at the end of November, which translated to 1.74 jobs for every unemployed person.

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

Minutes of the Fed’s Dec. 13-14 policy meeting published on Wednesday showed officials noted that the labor market remained “very tight,” with a “few remarking that some business contacts reported that they would be keen to retain workers even in the face of slowing demand for output because of their recent experiences of labor shortages and hiring challenges.”

The claims report also showed the number of people receiving benefits after an initial week of aid, a proxy for hiring, dropped 24,000 to 1.694 million in the week ending Dec. 24.

A separate report from global outplacement firm Challenger, Gray & Christmas on Thursday showed U.S.-based employers announced 43,651 job cuts in December, down 43% from November. The total was, however, 129% higher compared to December 2021 and was the second-largest monthly number announced in 2022.

For the whole of 2022, job cuts increased 13% to 363,824. It was still the second-lowest recorded annual total since Challenger began tracking the series in 1993.