WASHINGTON (Reuters) – New applicants for unemployment benefits fell slightly last week, but there are still signs that the recent financial market turmoil following the collapse of two local banks is hurting the economy. do not have.
The unexpected drop in claims reported by the Labor Department on Thursday suggests March could be another month of strong job growth. Weekly unemployment claims reports are the most timely data on the health of the economy.
Despite the Federal Reserve’s signal on Wednesday that it was on the verge of suspending its campaign of tightening monetary policy, there has been some relief as conditions in the labor market continue to tighten. Department economists expect the Federal Reserve to raise interest rates two more times this year.
“A week into the banking panic, the labor market is rock solid and there are no new layoffs nationwide,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “Credit conditions may tighten as banks become more cautious, but it could be weeks or months before that actually translates into a significant slowdown in economic activity.”
Initial claims for state unemployment benefits fell by 1,000 in the week ending March 18 to a seasonally adjusted 191,000.
Economists polled by Reuters had forecast 197,000 claims in the recent week. Despite a spate of job cuts by tech giants, claims have bounced back in a narrow range this year and remain very low by historical standards.
Economists plan to see if the trend continues when the government updates its seasonal adjustment coefficients, the models it uses to remove seasonal variations from data, in early April.
Unreconciled claims fell last week from 4,659 to 213,425. A surge in filings in Indiana and an increase in Massachusetts were offset by declines in California, Illinois and New York.
With 1.9 job openings per unemployed person in January, employers are generally reluctant to let workers go.
Wall Street stocks were trading high. The dollar fell against a basket of currencies. US Treasury yields were mixed.
Tighter credit terms
Labor market conditions may ease, especially following the failures of California’s Silicon Valley Bank and New York’s Signature Bank. Tighter financial conditions could lead banks to tighten credit, impacting households and small businesses, which have been the main drivers of job growth.
This was confirmed by the Federal Reserve, which raised the benchmark overnight lending rate by a quarter percentage point on Wednesday. The US Central Bank has raised its policy rate by 475 basis points since March last year to its current range of 4.75% to 5.00% from near zero.
“The events of the past two weeks are likely to result in some tightening in credit terms for households and businesses, weighing on labor market demand and inflation,” Fed Chairman Jerome Powell told reporters.
Claims data cover the period the government surveyed establishments for the non-farm payroll portion of the March employment report.
Billings were little changed between the February and March survey weeks, which could point to another month of strong employment gains. The economy added 311,000 jobs in February after adding 504,000 in January.
Next week’s data on the number of people receiving benefits after the first week of aid, a proxy for employment, should reveal more about the health of the labor market in March.
So-called recurring bills increased from 14,000 to 1.694 million in the week ending March 11, billing reports show. Ongoing claims are below pre-pandemic averages this year, averaging 1.674 million, suggesting some laid-off workers may be finding new jobs soon .
“Tight labor markets are the main reason we expect the Fed to raise rates by 25 basis points at their May and June meetings,” said Nancy Vanden Houten, chief U.S. economist at Oxford Economics. Stated. “But given the recent stress on the banking system and the uncertain impact on the economy, the Fed will proceed more cautiously.”
The housing market, which has taken the brunt of aggressive Fed rate hikes, is showing signs of stabilizing at very low levels. In a separate report, the Department of Commerce said new single-family home sales in February increased 1.1% to a seasonally adjusted annualized rate of 640,000 units, the highest since August.
However, sales of new homes are very volatile from month to month. Increased for 3 consecutive months.
Economists had predicted that new home sales, which make up a small portion of U.S. home sales, would decline at a rate of 650,000 units. Mortgage rates rose unexpectedly in early February and early March after nearly falling since November, according to data from mortgage lender Freddie Mac. Monthly sales increased in the South and West. In the Midwest it fell, and in the Northeast he plummeted 40.0%.
Sales in February decreased by 19.0% year-on-year. The median new home price in February was $438,200, up 2.5% from a year ago.
This week’s data shows sales of previously owned homes rebounded in February for the first time in a year. Homebuilder sentiment improved in March for the third month in a row, while single-family home starts and building permits rose in February. Nevertheless, the housing market is not yet out of the woods. Tighter lending standards could make it harder for prospective homebuyers to borrow.
“At the very least, the decline in housing activity has eased significantly and inventory looks manageable,” said Conrad Dequadros, senior economic adviser at Breen Capital in New York.
Reported by Lucia Mutikani.Editing: Chiju Nomiyama, Andrea Ricci
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