Ris­ing US lay­offs hint at ebbing la­bor mar­ket mo­men­tum

The Pak Banker - - MARKETS/SPORTS -

The num­ber of Amer­i­cans fil­ing for un­em­ploy­ment ben­e­fits rose more than ex­pected last week, sug­gest­ing some loss of mo­men­tum in the la­bor mar­ket amid a sharp eco­nomic slow­down and stock mar­ket sell­off.

Signs of creep­ing em­ploy­ment weak­ness were also flagged by an­other re­port on Thurs­day show­ing a 218 per­cent jump in an­nounced job cuts by U.S.-based em­ploy­ers in Jan­uary. The planned lay­offs were con­cen­trated in the en­ergy and retail sec­tors.

"The fu­ture is some­what darker ... the la­bor mar­ket may be past its peak for this cy­cle. It looks like the la­bor mar­ket has scaled back its rapid ad­vance last month," said Chris Rup­key, chief econ­o­mist at MUFG Union Bank in New York.

Ini­tial claims for state un­em­ploy­ment ben­e­fits in­creased 8,000 to a sea­son­ally ad­justed 285,000 for the week ended Jan. 30, the La­bor Depart­ment said. Claims re­mained below 300,000, a level as­so­ci­ated with strong la­bor mar­ket con­di­tions, for a 48th straight week - that is the long­est run since the early 1970s.

The four- week mov­ing av­er­age of claims, con­sid­ered a bet­ter mea­sure of la­bor mar­ket trends as it irons out week- to- week volatil­ity, rose 2,000 to 284,750 last week. Econ­o­mists had fore­cast claims ris­ing to 280,000 in the lat­est week.

The rise in lay­offs came amid a slow­down in eco­nomic growth. The econ­omy grew at only a 0.7 per­cent an­nual pace in the fourth quar­ter, held back by the head­winds of a strong dol­lar and fal­ter­ing global de­mand.

A down­turn in cap­i­tal spend­ing by en­ergy com­pa­nies, reel­ing from a col­lapse in oil prices, and in­ven­tory de­stock­ing by busi­nesses are also con­strain­ing growth. At the same time, a stock mar­ket rout sparked by fears of a global eco­nomic slump has caused fi­nan­cial mar­ket con­di­tions to tighten.

In a sep­a­rate re­port, global out­place­ment con­sul­tancy Chal­lenger, Gray & Christ­mas said em­ploy­ers re­ported 75,114 planned job cuts last month, up from De­cem­ber's 15-year low of 23,622. Jan­uary's planned lay­offs were the largest since July.

Re­tail­ers an­nounced plans to elim­i­nate 22,246 jobs from their pay­rolls, the most since Jan­uary 2009. The retail cuts were dom­i­nated by Wal­mart , which an­nounced plans to close 269 stores world­wide. Firms in the down­trod­den en­ergy sec­tor plan to slash head­count by 20,246, up from 1,682 in De­cem­ber.

Some econ­o­mists down­played the in­crease in lay­offs, cit­ing the on­go­ing job losses in the en­ergy in­dus­try and the im­pact of a bliz­zard that buried the north­east­ern United States in late Jan­uary. They also tied the rise to the dis­missal of sea­sonal and tem­po­rary work­ers af­ter the hol­i­day shop­ping sea­son.

"To date, even tak­ing the re­cent rise as given, the in­crease (in claims) is not suf­fi­cient to change our view that the ex­pan­sion re­mains in­tact and that the econ­omy is far from re­ces­sion. Claims are very volatile," said Rob Martin, an econ­o­mist at Bar­clays in New York.

In a third re­port, the Com­merce Depart­ment said new or­ders for man­u­fac­tured goods tum­bled 2.9 per­cent in De­cem­ber, the largest drop in a year, af­ter fall­ing 0.7 per­cent in Novem­ber.

The re­ports came on the heels of weak data on ex­port growth and con­sumer spend­ing that sug­gest the Fed­eral Re­serve will prob­a­bly not raise in­ter­est rates in March. The U.S. cen­tral bank raised its short- term in­ter­est rate in De­cem­ber for the first time in nearly a decade.

The dol­lar fell to a more than 3-1/2month low against a bas­ket of cur­ren­cies as in­vestors fur­ther di­aled back their rate hike ex­pec­ta­tions. Prices for U.S. govern­ment debt rose, while U.S. stocks were mixed in volatile trad­ing.

While the claims data has no bear­ing on Jan­uary's em­ploy­ment re­port, which is sched­uled to be re­leased on Fri­day, as it falls out­side the sur­vey pe­riod, it fits in with per­cep­tions of a de­cel­er­a­tion in the pace of job growth.

Ac­cord­ing to a sur­vey of econ­o­mists, non­farm pay­rolls are ex­pected to have in­creased 190,000 last month af­ter surg­ing by 292,000 in De­cem­ber. The un­em­ploy­ment rate is fore­cast hold­ing steady at a 7-1/2-year low of 5 per­cent.

In an­other re­port on Thurs­day, the La­bor Depart­ment said non­farm pro­duc­tiv­ity, which mea­sures hourly out­put per worker, fell at a 3.0 per­cent rate in the fourth quar­ter, the big­gest drop in more than a year, af­ter ris­ing at a 2.1 per­cent rate in the third quar­ter.

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