The number of Americans filing for unemployment benefits fell sharply last week, in a sign that the US labor market remains resilient despite rising interest rates. The Labor Department reported on Wednesday that jobless claims fell by 24,000 to 209,000. Last week’s total of 233,000 was the highest since August. The four-week moving average of claims, which mitigates week-to-week volatility, fell by 750 to 220,000.
Apps are seen as a proxy for layoffs. These rates remain unusually low by historical standards, suggesting that most Americans enjoy extraordinary job security. The combination of a perpetual slowdown in the labor market and falling inflation has raised hopes that the Fed can manage the so-called soft fall – slowing economic activity enough to control inflation without pushing the US into recession. .
Overall, 1.84 million Americans were receiving unemployment benefits in the week ending Nov. 11, down 22,000 from the previous week. The Federal Reserve has raised its benchmark interest rate 11 times since March 2022 to slow the economy and rein in inflation, which reached a four-decade high last year. The labor market and economic growth have remained surprisingly resilient, defying expectations that the economy will slide into recession this year.
At the same time, inflation has slowed significantly. In June 2022, consumer prices increased by 9.1% from the previous year. Last month, year-on-year inflation fell to 3.2%, although it remained above the Fed’s target of 2.%.
The combination of a perpetual slowdown in the labor market and falling inflation has raised hopes that the Fed can manage the so-called soft fall – slowing economic activity enough to control inflation without pushing the US into recession. .
Jobless claims are declining but challenges remain evident in the labour market
Applications for initial unemployment benefits in the United States fell the most since June, suggesting that employers are still holding on to workers in a gradually slowing labor market.
Initial claims fell in the week ending Nov. 18, according to Labor Department data released Wednesday. Persistent claims, an indicator of the number of people receiving unemployment benefits continuously, fell to 1.84 million in the week ended Nov. 11. This was the first decline in two months.
Unemployment claims data tend to be particularly volatile at the end of the year on holidays. The four-week moving average of initial claims, which mitigates some of these volatilities, fell to 220,000.
Despite the decline in claims, orders were trending higher overall. During their meeting earlier this month, Fed officials said they are looking for conditions to ease more to meet the inflation target, according to the minutes of the meeting released Tuesday.
“The unusual retention of workers ahead of the Thanksgiving holiday explains the decline in seasonally adjusted jobless claims. With weekly volatility calming, the growing trend in ongoing claims suggests that unemployed workers are finding it increasingly difficult to get new jobs. On an unadjusted basis, initial claims rose to their highest levels since July, led by California, Oregon and Kentucky. Unadjusted ongoing claims rose the most in four months.
A separate report on Wednesday showed US durable goods orders in October fell more than expected, suggesting factory output will struggle for momentum.
By examining the impact of “good” and “bad” economic times on inequality through the unemployment channel, this research emphasizes the importance of implementing policies that not only promote economic growth, but also ensure equitable distribution of resources and opportunities.
The durable goods sector declines and shows practical market resilience
The October 2022 durable goods report revealed a significant drop in new orders for manufactured durable goods, which fell by $16.0 billion, or 5.4%, to $279.4 billion. This decline, observed in three of the past four months, was sharper than the pre-report estimate of a decrease of 3.2%. September saw a 4.0% increase in orders.
With the exception of transport, new orders remained virtually unchanged, suggesting that the overall decline was severely impacted by the transport sector. Excluding the defense, new orders saw a 6.7% decline. A marked decline in orders for transportation equipment, by 14.8% to $92.1 billion, was the main driver of this overall decline.
The weekly initial claims report for the week ending November 18 showed a decline in seasonally adjusted initial claims to 209,000, down 24,000 from the revised level of the previous week. This figure was lower than the pre-report estimate of 226,000 new claims. The previous week’s level was revised slightly upwards from 231,000 to 233,000. The four-week moving average, a more stable measure, fell marginally to 220,000, reflecting the overall downtrend in initial claims.
The seasonally adjusted insured unemployment rate remained steady at 1.2% for the week ended November 11. The number of seasonally adjusted insured unemployment during the same week decreased to 1,840,000, down 22,000 from the previous week’s revised level. However, the 4-week moving average for insured unemployment rose to 1,836,750, marking the highest level since December 18, 2021.
In short, while the durable goods sector experienced a significant decline, mainly driven by lower orders for transportation equipment, the labor market showed signs of resilience with initial jobless claims declining. These contradictory trends highlight the complex and multifaceted nature of the current economic landscape.
Inflation expectations accelerate in the US
Short-term inflation expectations in the United States rose to an eight-month high in November, and long-term price expectations remained at levels not seen since 2011.
Americans expect prices to rise at an annual rate of 4.5% over the next year, up from 4.4% expected earlier in the month, according to the November final reading from the University of Michigan. Data on Wednesday showed they expect costs to rise 3.2% over the next five to ten years. Joan Hsu, director of the survey, said in a statement: “Consumers seem concerned that declining inflation may reverse in the coming months and years.”
“Despite lower prices at the pump, the one-year gas price forecast rose to its highest reading since June 2022, and the five-year gas price forecast is the highest since March 2022,” Hsu said.”
The University of Michigan’s consumer confidence index improved from the previously mentioned figure to 61.3 thanks to brighter views on their finances. However, the index stands at a six-month low as views on the short- and long-term economic outlook have deteriorated since October.
Earlier this month, Federal Reserve Chairman Jerome Powell was asked how next year’s high inflation reading would affect the central bank’s December interest rate decision. Although statistics played a key role in the decision to raise interest rates last year, Powell stressed that inflation expectations are in a “good place” and that the committee is looking at “a bunch of things.”
Conditions for the purchase of durable goods have improved from earlier in the month, which likely reflects some discount on goods for the holiday shopping season. Consumers’ perception of their current and future financial situation is higher than earlier in the month.
