The number of Americans filing new claims for unemployment benefits rose less than expected last week, showing the labor market is still growing and at the same time the economy is recovering faster than previously estimated in the third quarter.
Initial claims for state jobless benefits rose 2,000 to a seasonally adjusted 216,000 for the week ended Dec. 17, the Labor Department reported on Thursday. Economists polled by Reuters had forecast 222,000 claims for the latest week.
Jobless claims have been up and down in recent weeks, but remain below the 270,000 threshold, which economists say is unexpected. There have been job cuts in the technology sector and interest rate sensitive industries such as housing have had no material impact on claims.
Federal Reserve Chairman Jerome Powell said last week "we have a structural labor shortage". The tight labor market is prompting the U.S. central bank to remain aggressive in tightening policy, with the Fed last week projecting at least an additional 75 basis points of increase in borrowing costs by the end of 2023. The Fed has already raised its policy rate by 425 basis points this year from near zero to a range of 4.25%-4.50%, the highest since late 2007.
The claims data covers the period when the government surveyed business establishments for the NFP component of the December employment report. Job growth averaged 392,000 per month this year.
Economists believe that companies are likely to reduce hiring before starting layoffs. Employers are generally reluctant to lay off workers after struggling to find workers during the Covid-19 pandemic.
Claims reports showed the number of people receiving benefits after the initial week of aid fell by 6,000 to 1.672 million in the week ending December 10.
Some economists, however, have argued against reading the continued rise in persistent claims as a sign of easing labor market conditions. They note that most employees choose not to start new jobs during the holiday period and that companies are also temporarily closed during this time.
On the other hand, gross domestic product increased at an annual rate of 3.2% last quarter, the government reported in its third GDP estimate. It has been revised from the 2.9% rate reported last month. The economy contracted at a rate of 0.6% in the second quarter.
Despite fears of a deepening recession and a weakening housing market, growth estimates for the fourth quarter are as high as 2.7%, with consumers doing heavy work, also supported by accumulated savings during the pandemic.
