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The number of Americans filing new applications for unemployment benefits fell last week, economists estimated on Thursday, though new job opportunities for those who are laid off remained scarce amid a reluctance by businesses to boost hiring.
Initial claims for state unemployment benefits dropped to a seasonally adjusted 219,000 for the week ended October 25 from 232,000 in the prior week, JPMorgan calculated. Estimates from Goldman Sachs and Nationwide were within that ballpark.Â
Claims data was unavailable for Arizona, Massachusetts and Washington, D.C., Economists made assumptions for the three, in line with what the Labor Department would normally do when data is not available.
Despite the U.S. government being shut for almost a month, states continue to collect the claims data, submitting it to the Labor Department. Economists are accessing the data and using seasonal adjustment factors the government published earlier this year to make the weekly claims estimates.
Claims at current estimated levels suggested the labor market remained stable and would argue against additional interest cuts from the Federal Reserve.Â
“This will bolster the view of those at the Fed who think another rate cut isn’t necessary in December,” said Oren Klachkin, financial market economist at Nationwide. “Low claims demonstrate continued economic resilience.”Â
The U.S. central bank on Wednesday cut its benchmark overnight interest rate by another 25 basis points to the 3.75%-4.00% range. Fed Chair Jerome Powell told reporters “a further reduction in the policy rate at the December meeting is not a foregone conclusion, far from it.”
No Material Shift Towards Employment Contraction
Still, there has been a pick-up in layoffs, with economists blaming low demand for labor because of economic uncertainty, tariffs on imports and companies embracing artificial intelligence. A sharp reduction in labor supply because of raids on undocumented immigrants is also weighing on the labor market.
Amazon this week said it would cut up to 14,000 jobs from its global corporate workforce. Layoffs are also happening in the automobile sector. American companies have announced more than 25,000 job cuts this month, according to a Reuters tally.
“The labor market still appears far away from a material shift toward a contraction in employment that might signal an imminent recession, despite some recent headlines concerning layoffs at certain large firms,” said Michael Hanson, an economist at JPMorgan.Â
“The latter points to continued weak labor demand that has pushed up the average duration of unemployment and pushed down the break-even level of payroll growth.”
While regular claims remain low by historical standards, applications for benefits by federal employees have surged this month, likely related to the more than 150,000 workers who dropped off payrolls at the end of September after accepting buyouts. Some furloughed federal employees could also be seeking benefits, though they would have to reimburse the program when they receive their back pay.
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Haver Analytics estimated federal claims, which are reported under a different program, jumped to 10,062 during the week ending October 18 from 7,287 in the prior week. These claims were about 572 in early September.
The number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, increased to a seasonally adjusted 1.957 million during the week ending October 18, a two-and-a-half-month high, from 1.945 million, JPMorgan estimated. That was broadly in line with the calculations from Goldman Sachs and Nationwide.
The so-called continued claims reading aligned with the Conference Board survey, which showed consumers’ perceptions of the labor market remained downbeat in October. The unemployment rate was near a four-year high of 4.3% in August.
(Reporting by Lucia Mutikani; Editing by Stephen Coates)
