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US weekly jobless claims edge up; mid-Atlantic factory activity slumps

2023-04-20T13:37:25Z

An employee hiring sign with a QR code is seen in a window of a business in Arlington, Virginia, U.S., April 7, 2023. REUTERS/Elizabeth Frantz

The number of Americans filing new claims for unemployment benefits increased moderately last week, suggesting the labor market was gradually slowing as the Federal Reserve’s year-long interest rate hiking campaign dampens demand.

Initial claims for state unemployment benefits rose 5,000 to a seasonally adjusted 245,000 for the week ended April 15, the Labor Department said on Thursday. Data for the prior week was revised to show 1,000 more applications received than previously reported. Economists polled by Reuters had forecast 240,000 claims for the latest week.

The combination of spring breaks, which temporarily left support staff at some school districts unemployed, and people who have exhausted their severance packages following a rush of layoffs in the technology sector and other areas of the economy sensitive to interest rates, could account for part of the rise in claims last week.

Unadjusted claims dropped 7,021 to 228,216 last week as a surge of 6,703 in applications in New York and an increase of 3,079 in Georgia as well as notable rises in Connecticut and Rhode Island were offset by decreases in California, Texas, Pennsylvania, Indiana and Ohio.

While the labor market is cooling, claims at current levels suggest employment growth remains strong, which should allow the U.S. central bank to raise rates next month before possibly pausing its fastest monetary policy tightening cycle since the 1980s.

The Fed’s “Beige Book” report on Wednesday described job gains as having “moderated somewhat” in early April “as several districts reported a slower pace of growth” than in recent reports. It also said contacts reported the labor market becoming less tight, noting “a small number of firms reported mass layoffs,” which were “centered at a subset of the largest companies.”

Though the report said several districts noted that banks had tightened lending standards, the impact has not yet been visible in economic data, including claims. Tighter credit conditions generally act with a lag in the economy.

Economists expect the effects to be felt in the months ahead and many are forecasting a recession by the second half of 2023.

The housing market is in a deep recession, while manufacturing is slumping as higher borrowing costs stifle demand. A separate report from the Philadelphia Fed on Thursday showed its measure of factory activity in the mid-Atlantic region plunged to the lowest level in nearly three years in April.

Manufacturers in the region expected activity to remain subdued over the next six months.

U.S. stock futures were lower. The dollar slipped against a basket of currencies. U.S. Treasury prices rose.

The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls portion of April’s employment report.

Claims were little changed between the March and April survey weeks. The economy created 236,000 jobs in March, more than double what is needed to keep up with growth in the working-age population.

Data next week on people receiving benefits after an initial week of aid, a proxy for hiring, will offer more clues on the state of the labor market in April. The so-called continuing claims increased 61,000 to 1.865 million during the week ending April 8, the claims report showed.

Continuing claims remain low by historical standards as some of the laid-off workers are quickly finding employment. There were 1.7 job openings for every unemployed person in February.