The number of new applications for unemployment benefits dropped by 19,000 to 204,000 last week, the Labor Department reported Thursday.
Falling jobless claims are a sign the labor market is remaining resilient despite the Federal Reserve’s historic effort to tighten monetary policy to slow economywide spending and drive down inflation. Last week’s number is the lowest since September.
The weekly jobless claims number has been closely watched over the past year or so, given the Fed’s aggressive pace of rate hikes. The report comes after the central bank raised rates by 50 basis points in December and is likely to increase the rate again at the end of this month. The report, coupled with another strong report on job openings this week, will give the Fed more ammo to continue driving up rates.
“The Federal Reserve looks more likely than ever to push interest rates up to their 5.25% terminal rate forecast this year. Stock investors got the hint and sold shares as there is not much of a recession to be seen in any of today’s economic reports,” said Chris Rupkey, chief economist at FWDBONDS.
JOB OPENINGS FELL SLIGHTLY IN NOVEMBER AS RECESSION FEARS GROW
For a stretch in late summer, jobless claims defied expectations and remained low — even despite the Fed’s aggressive rate hikes. Since the start of October, though, they have been above 200,000.
While the number of new jobless claims has remained low enough to avert fear that the country is already in the throes of a recession, most economists anticipate that the U.S. economy will enter a Fed-induced recession at some point in the new year. That is because rate hikes can take a while to filter through the broader economy and create recessionary conditions and job losses.
It is expected that as the rate hikes begin to ripple across the economy, jobless claims begin to tick up, and then monthly jobs reports will begin to turn negative.
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The economy gained 263,000 jobs in November, more than expected, according to the Bureau of Labor Statistics. In several other months last year, the monthly reports came in hotter than expected.
December’s employment report will be released by the BLS this coming Friday. Forecasters expect that the economy notched 200,000 jobs last month and that the unemployment rate remained at a low 3.7%.
