Fri | Dec 1, 2023

Applications for jobless claims fall for third straight week

Published:Thursday | March 2, 2023 | 9:14 AM
A hiring sign is displayed in Arlington Heights, Illinois, Sunday, February 5, 2022. On Thursday, the Labor Department reports on the number of people who applied for unemployment benefits last week. (AP Photo/Nam Y. Huh)

The number of people applying for unemployment benefits in the US fell for third straight week.

That's good news for American workers, but potentially bad news in the fight against inflation by the Federal Reserve, which has been ratcheting up its benchmark interest rate for a year in an effort to cool the economy, loosen the labour market and tame inflation.

Applications for jobless claims in the US for the week ending February 25 fell to 190,000 from 192,000 the previous week, the Labor Department said Thursday. It's the seventh straight week claims were under 200,000.

The four-week moving average of claims, which evens out some of the weekly volatility, rose by 1,750 to 193,000, remaining below the 200,000 threshold for the sixth straight week.

Applications for unemployment benefits are considered a proxy for the number layoffs in the US.

In February, the Fed raised its main lending rate by 25 basis points, its eighth rate hike in less than a year. The central bank's benchmark rate is now in a range of 4.5 per cent to 4.75 per cent, its highest level in 15 years.

The Fed's hawkish interest rate policy appeared to be slowing inflation, but recent data has suggested otherwise. Some economists now expect the Fed to raise its benchmark rate by a substantial half-percentage point when it meets later this month.

The Fed's rate hikes have done little to cool a red-hot US job market, which has put upward pressure on wages, and as a result, prices.

Last month, the government reported that employers added a better-than-expected 517,000 jobs in January and that the unemployment rate dipped to 3.4 per cent, the lowest level since 1969. Fed policymakers have forecast that the unemployment rate would rise to 4.6 per cent by the end of this year, a sizable increase historically associated with recessions.

Though the US labor market remains strong, layoffs have been mounting in the technology sector, where many companies overhired after a pandemic boom. IBM, Microsoft, Amazon, Salesforce, Facebook parent Meta, Twitter and DoorDash have all announced layoffs in recent months.

The real estate sector has also been battered by the Fed's interest rate hikes. Higher mortgage rates — currently above 6 per cent — have slowed home sales for 12 straight months. That's almost in lockstep with the Fed's rate hikes that began last March.

About 1.66 million people were receiving jobless aid the week that ended February 18, a decrease of 5,000 from the week before.


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