Northwest Arkansas Democrat-Gazette
Jobless-aid applications up 21,000
Surge biggest in five months, though layoffs staying low
The number of Americans applying for unemployment benefits last week jumped by the most in five months, but layoffs are historically low as the labor market remains largely unaffected by the Federal Reserve’s aggressive bid to cool inflation.
Applications for jobless claims in the United States for the week that ended Saturday rose by 21,000 to 211,000 compared with the previous week, the Labor Department reported Thursday. Last week marked the first in the past eight weeks that claims have exceeded 200,000.
Applications for unemployment benefits are considered a proxy for layoffs. The Labor Department today will release its overall tally of February job gains and unemployment. The central bank is closely watching the report to see whether the employment market has softened from a jarring jobs gain in January.
The labor market is key in the Fed’s fight against inflation because current market conditions better allow workers to lock in higher wages — whether swapping jobs or negotiating to stay in a role. Fed policymakers have said such upward wage pressure helps drive inflation as consumers can maintain high levels of spending amid decades-high prices and the higher borrowing costs meant to fight them.
Last month the Fed raised its main lending rate by a quarter of a percentage point, the eighth straight increase in its year-long battle against stubborn inflation.
The central bank’s benchmark rate is now in a range of 4.5% to 4.75%, its highest level in 15 years, and some analysts are forecasting three or more increases that would push the lower end of that rate to 5.5%. The rate stood at virtually zero at the start of 2022.
The Fed’s rate increases are meant to cool the economy, labor market and wages, thereby suppressing price gains. Consumer inflation, however, remains more than double the Fed’s 2% target, and the economy is growing and adding jobs at a healthy clip.
Fed policymakers meet March 21-22 to decide their next rate move.
Chair Jerome Powell testified before Congress this week that the Fed is prepared to reaccelerate the pace of rate increases if economic data continued to come in strong, but officials haven’t determined yet what they’ll do at the meeting.
Today’s employment report, as well as fresh inflation data next week, will help inform the decision.
Last month, the Labor Department reported employers added a surprising 517,000 jobs in January and that the unemployment rate dipped to 3.4%, the lowest level since 1969. Analysts expect today’s jobs report to show the U.S. economy added another 208,000 jobs last month, according to FactSet.
Fed policymakers have forecast that the unemployment rate would rise to 4.6% by the end of the year, a sizable increase historically associated with recessions.
Though the U.S. labor market remains strong, layoffs have been mounting in the technology sector, where many companies over-hired during an early pandemic boom.
IBM, Microsoft, Amazon, Salesforce, Facebook parent Meta Platforms, Twitter and DoorDash have all announced layoffs in recent months.
The real estate sector has also been battered by the Fed’s rate increases. Higher mortgage rates — currently exceeding 6% — have slowed home sales for 12 straight months. That’s almost in lockstep with the Fed’s rate increases that began in March 2022.
Mortgage buyer Freddie Mac reported Thursday that the average rate on the benchmark 30-year mortgage climbed to 6.73% from 6.65% last week. The average rate a year ago was 3.85%.
In the jobs market, the four-week moving average of unemployment claims, which flattens out some of the weekly ups and downs, rose by 4,000 to 197,000, remaining below the 200,000 threshold for the seventh straight week, according to the Labor Department.
About 1.72 million Americans received jobless aid the week that ended Feb. 25, an increase of 69,000 from the previous week, the agency said.
On an unadjusted basis, claims last week jumped by more than 35,000 to 237,513. California and New York accounted for three quarters of that increase. But severe weather across the Midwest and California is expected to have been a factor, according to the Labor Department.