US weekly jobless claims at nine-month low; The job market is still tight

WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits fell to a nine-month low last week, indicating continued strong job growth in October as the labor market remains tight.

The unexpected decline in initial jobless claims announced by the Labor Department on Thursday added to strong retail sales and factory production in September, indicating sustained momentum in the economy. The influx of upbeat economic data has fueled expectations that the Federal Reserve may keep interest rates high for longer. Financial markets continued to rule out raising interest rates next month due to the rise in US Treasury yields.

“Companies that talk about profits may be wary of the outlook and risks ahead, but they are still holding on tight to their workers as good help is increasingly hard to find,” said Christopher Rupke, chief economist at FWDBONDS in New York. “The economy and labor markets are not simply slowing down, and time will tell whether this reignites the flames of inflation that until recently seemed to be under control.”

Initial claims for state unemployment benefits fell by 13,000 to a seasonally adjusted level of 198,000 for the week ending October 14, the lowest level since January. Economists polled by Reuters had expected 212,000 claims in the last week.

Although the labor market is gradually slowing, conditions remain difficult, with claims reaching the very low end of their range of 194,000 to 265,000 for the year. Unadjusted claims fell by 18,561 to 181,181 last week. There were significant declines in Texas, New York, New Jersey, Georgia and California, which offset the notable increase in Tennessee.

So far there has been limited impact from the United Auto Workers (UAW) strikes, which have disrupted supply chains, although claims rose in Michigan during the week ending October 7, related to an industrial action. Ford Motor Co (FN), General Motors (GM.N) and Chrysler parent Stellantis (STLAM.MI) have furloughed and laid off thousands of non-striking workers.

The Fed’s Beige Book report released on Wednesday said that “labor market tightness continued to ease across the country” in early October, indicating slowing wage pressure. “Many regions reported improvements in recruitment and retention as candidate pools expanded,” according to Page’s book, but she also noted that “most regions continue to report persistent challenges in recruiting and hiring skilled tradesmen.”

The labor market is showing strength despite the US central bank raising its benchmark overnight interest rate by 525 basis points to the current range of 5.25% to 5.50% since March 2022. Financial markets expect the Fed to leave interest rates unchanged from October 31 To November. . Policy Meeting No. 1, according to CME Group’s FedWatch tool, due to the rise in Treasury yields.

However, Federal Reserve Chair Jerome Powell appears to be backing away from expectations that rate hikes have come to an end, telling the Economic Club of New York that strength in the economy and labor market “could put further progress in inflation at risk and could justify further progress.” of progress.” Tighten monetary policy.”

But Powell also acknowledged the recent rise in geopolitical tensions and tightening financial conditions.

Longer-term bond yields rose to multi-year highs in response to the economy’s resilience. The labor market drives consumer spending and the overall economy, ultimately keeping inflation high. The economy is expected to grow in the third quarter at its fastest pace since late 2021.

Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. US Treasury bond prices fell, with the yield on benchmark ten-year bonds approaching 5%, a level not seen since before the financial crisis in 2007.

Home sales decline

While the broader economy is weathering the high interest rate environment, the housing market is in recession and business sentiment remains weak. A second report from the National Association of Realtors showed that existing home sales fell 2.0% last month to a seasonally adjusted annual rate of 3.96 million units, the lowest level since October 2010.

High mortgage rates and tight supply have limited affordability for many first-time buyers, whose share of purchases reached 27% in September, well below the 40% that economists and landlords say is needed for the housing market. The strong one.

And with the average interest rate on a 30-year fixed mortgage rising to a nearly 23-year high of 7.63% last week, according to data from mortgage financing agency Freddie Mac, home sales are likely to decline further.

“There is no relief in sight for the battered U.S. housing market absent a sharp decline in mortgage rates and a rise in inventory, which would go a long way toward improving affordability,” said Jay Hawkins, chief economist at BMO Capital Markets in Toronto. “.

A third report from the Federal Reserve Bank of Philadelphia showed that business conditions in the Mid-Atlantic region remained weak in October, although manufacturers expected improvement over the next six months. Companies in the region covering eastern Pennsylvania, southern New Jersey and Delaware reported mostly steady hiring this month.

The claims report covers the week in which the government surveyed businesses for the nonfarm payrolls component of its October employment report. Claims declined between the September and October survey periods. The economy created 336,000 jobs in September, the most in eight months.

Data due next week on the number of people receiving benefits after an initial week of aid, an indicator of employment, will shed more light on the health of the labor market in October. The claims report showed that so-called continuing claims increased by 29,000 to a still-low level of 1.734 million during the week ending October 7.

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