US weekly jobless claims drop to eight-month low; labor market remains tight

WASHINGTON, Sept 21 (Reuters) – The number of Americans filing new claims for unemployment benefits fell to an eight-month low last week, showing a tight labor market despite slowing job growth. It showed that it continues.

A report released by the Labor Department on Thursday also revealed that the number of unemployed people in early September was the lowest since January. The report comes a day after the Federal Reserve left interest rates unchanged but became more hawkish, predicting further rate hikes by the end of the year and monetary policy remaining much tighter than previously expected through 2024. It had been.

“This economy shows no signs of slowing, suggesting that inflation will not return to target,” said Christopher Rapkey, chief economist at FWDBONDS in New York. “The Fed was wise to hold off on raising rates again just in case. Now it looks like further hikes are warranted.”

First-time claims for state unemployment benefits for the week ending Sept. 16 fell by a seasonally adjusted 20,000 to 201,000, the lowest level since January. Economists polled by Reuters had predicted 225,000 insurance claims in the past week. The number of insurance claims this year is on the lower end of the range from 194,000 to 265,000.

But a partial strike by the United Auto Workers union (UAW) has forced automakers to lay off workers due to shortages in some materials, and claims could rise in the coming weeks.

Last week, the UAW launched targeted strikes against Ford (FN), GM (GM.N) and Stellantis (STLAM.MI), affecting one of each company’s assembly plants. It is threatening to expand the work stoppage, which currently only affects about 12,700 of the 146,000 affected UAW members.

Although striking workers are not eligible for unemployment benefits, the strikes have disrupted supply chains.

Ford is furloughing 600 workers who are not participating in the strike, and GM is suspending operations at its Kansas auto plant, which is expected to affect 2,000 workers. Chrysler’s parent company, Stellantis, announced it is laying off 68 workers in Ohio and plans to furlough another 300 workers in Indiana.

Unadjusted claims rose by just 67 last week to 175,661. Significant declines in filings in Indiana and California largely offset large increases in South Carolina, New York, and Georgia.

“While the labor market remains tight, the balance between supply and demand continues to improve,” Federal Reserve Chairman Jerome Powell said on Wednesday.

Employment growth is slowing and the number of job openings is decreasing. Even though concerns about a recession remain, the resilience of the labor market is supporting the economy. Leading indicators of future U.S. economic activity fell 0.4% in August, following a 0.3% decline in July, the Conference Board said in its second report on Thursday.

This was the 17th consecutive month of decline. Starting in March 2022, the U.S. central bank will raise the benchmark overnight interest rate by 525 basis points, to the current range of 5.25% to 5.50%.

Insurance claims statistics and the Fed’s hawkish stance pushed stocks down on Wall Street. The dollar rose against a basket of currencies. U.S. bond prices fell and the benchmark 10-year Treasury yield rose to its highest level in about 16 years.

housing instability

The insurance claims data covers the period when the government surveyed business establishments based on the number of non-agricultural employees in the September employment statistics.

The strike began at the end of the survey week, so it is unlikely to affect pay. The worker likely received his or her salary for the week. The number of claims decreased between the August and September study period.

Data on the number of people receiving benefits after the first week of support, an indicator of employment, will be released next week and will provide further clues about the state of the labor market in September.

The number of so-called continuing claims fell by 21,000 to 1.662 million for the week ending September 9, the insurance claims report, also the lowest level since January. This suggests that laid-off workers are finding jobs quickly.

While the labor market remains unyielding, the housing market showed signs of stabilizing earlier this year, but concerns that soaring oil prices could hamper the Fed’s efforts have led to a decline in 10-year Treasury notes. Mortgage interest rates have resumed their upward trend and remain sluggish. against inflation.

According to the National Association of Realtors’ third annual report, existing home sales fell by a seasonally adjusted annual rate of 0.7% to 4.04 million units last month.

Sales of existing homes are counted at closing. Last month’s sales likely reflect deals signed in July, before a recent spike in mortgage rates pushed interest rates on popular 30-year fixed mortgages above 7%.

Home sales last month were held back by a persistent supply squeeze, with inventory down 14.1% year-on-year to 1.1 million, the lowest on record for August.

As a result, the median home price rose 3.9% year over year to $407,100, making it the fourth highest. In June 2022, it hit a record high of $413,000.

“The outlook for sales improvement in the coming months is bleak,” said Ben Ayers, senior economist at Nationwide in Columbus, Ohio. “2023 could end with a bang for the real estate sector, as any real interest rate cuts are likely to be far away until 2024.”

The news regarding manufacturing was gloomy. Manufacturing, along with housing, has borne the brunt of the Fed’s aggressive monetary tightening.

The Philadelphia Fed’s fourth report showed that factory activity in the Mid-Atlantic region slowed in September. Companies in regions including eastern Pennsylvania, southern New Jersey and Delaware reported declines in new orders and shipments. They continued to report employment declines.

The Philadelphia Fed’s business conditions index was -13.5 this month, down from 12.0 in August. This is the 14th time in the past 16 months that the index has turned negative.

“Weak commodity demand and rising borrowing costs are hurdles for activity,” said Rubela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. “However, supply chain reshoring, infrastructure projects and stable demand could support manufacturing output in the long term.”

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