The number of Americans filing new jobless claims fell last week, showing that many people are still out of work despite an increase in tech job cuts that have fueled fears of a recession.
The unemployment report from the US Department of Labor, which was released on Thursday and provided timely data on the economy, said that the labor market remains strong. This, along with consumer spending, makes the Federal Reserve continue to raise interest rates, although slowly among the signs of inflation are beginning to decrease.
“This is a testament to how strong the labor market is going to be,” said Robert Frick, chief economist at Navy Federal Credit Union in Vienna, Virginia.
The government’s first unemployment report fell 4,000 to a seasonally adjusted 222,000 in the week ended November 12. Economists polled by Reuters had forecast a reading of 225,000 last week.
There has been an increase in tech job cuts, with Twitter, Amazon and Meta, Facebook’s parent company, announcing thousands of job cuts this month. Companies in non-interest bearing sectors such as housing and finance also let workers go.
The withdrawal has not yet been reflected in official data. Default claims fell 6,101 to 199,603 last week. Claims in California, which is the largest producer of tech jobs in the United States, rose by just 302 last week. Largest declines in claims were reported in Florida, Georgia, Kentucky, Indiana and Texas, with large increases in Minnesota and North Carolina.
Economists say businesses outside the technology and housing sectors are hoarding workers after the difficulty of finding work in the wake of the COVID-19 pandemic. With 1.9 job openings for every unemployed person in September, some of the laid-off workers may be finding new work quickly.
Economists at Goldman Sachs dismissed concerns that tech withdrawals are signaling a slowdown in the economy in a letter this week. He also said that tech job openings remain above their pre-pandemic levels, and that layoffs in the sector have not been a leading indicator of a worsening labor market.
The Fed has raised its policy several times this year from near zero to 3.75 percent – a 4 percent increase as it struggles to return inflation to the 2 percent rate that has been the fastest since the 1980s.
Financial markets are betting that the Fed will cut by half a percent at its December 13-14 policy meeting, according to the CME Group’s FedWatch Tool.
Meanwhile, the economy is weathering a further fiscal policy storm, with data on Wednesday showing strong growth in retail sales last month. This has led economists to expect that the policy can see a long-term increase, eventually reaching a high level that will be maintained for a while.
Stocks on Wall Street were trading lower. The dollar rose against a basket of currencies. US Treasury prices have fallen.
Struggle in the housing market
Demand rose slightly between the October and November survey period, indicating another month of strong job growth. The economy created 261,000 jobs in October.
But the housing market is collapsing because of high rents, while production is freezing. Industrial activity in the mid-Atlantic region fell sharply in November, a report from the Philadelphia Fed showed.
A third report from the US Commerce Department showed that home starts fell 4.2% to an annualized rate of 1.425 million last month. Initials fell 8.8 percent year-over-year in October.
Single-family home starts, the largest share of housing construction, fell 6.1 percent to a total of 855,000 units, the lowest since May 2020. Single-family home starts fell in all four regions.
Housing starts of five or more units fell 0.5 percent to 556,000 units. Construction of multi-family homes has been successful as rising interest rates force many homebuyers to remain borrowers. The largest number of rents that go up every year in October, according to the latest consumer prices.
The 30-year fixed rate is rising above 7 percent, the highest rate since 2002, according to data from housing finance agency Freddie Mac. A survey on Wednesday showed confidence among single-family home builders fell for the 11th straight month in November.
New home building permits fell 2.4 percent to a total of 1.526 million units in October. Permits for single-family homes fell 3.6 percent to 839,000 units, the lowest since May 2020. Permits for housing projects with five or more units fell 1.9 percent to 633,000 units.
The number of single-family homes under construction fell, while the number of homes completed was the lowest since January, indicating that supply remains strong even as demand slows, which could prevent prices from falling.
“Rising mortgage rates and hesitant homebuilders could cause the housing shortage to deepen in the near future if activity falls below 2019 levels,” said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina.