The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting the labor market remains tight despite higher interest rates.
Initial claims for state unemployment benefits dropped 15,000 to a seasonally adjusted 190,000 for the week ended Jan. 14, the Labor Department said on Thursday. Economists polled by Reuters had forecast 214,000 claims for the latest week.
Part of the surprise drop in claims likely reflected continuing challenges adjusting the data for seasonal fluctuations at the start of the year.
Through the seasonal volatility, claims have remained at levels consistent with a tight labor market, even as layoffs have accelerated in the technology industry and interest rate-sensitive sectors like finance and housing.
Microsoft said on Wednesday it would eliminate 10,000 jobs, joining cloud-computing rival Amazon.com, which this month started notifying employees of its own 18,000-person job cuts. Economists cautioned against reading the technology layoffs as flagging a deterioration in labor market conditions, arguing that these companies were right-sizing after over-hiring during the Covid-19 pandemic.
“The tech sector is just getting back to where they were in 2020 or 2021, which I don’t think is a bad situation,” said John Blevins, a guest lecturer at Cornell’s SC Johnson College of Business. “It’s still a huge workforce. These people being let go at these major tech firms will get new replacement jobs almost immediately.”
Outside the technology industry, economists say companies are generally reluctant to send workers home after difficulties finding labor during the pandemic. They expect companies to cut back on hiring before resorting to layoffs.
Indeed, the Federal Reserve’s Beige Book on Wednesday reported that “many firms hesitated to lay off employees even as demand for their goods and services slowed and planned to reduce headcount through attrition if needed.”
The claims data covered the period during which the government surveyed businesses for the nonfarm payrolls component of January’s employment report.
Claims decreased between the December and January survey weeks. The economy added 223,000 jobs in January.
Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will shed more light on employment growth in January. In the week ending Jan 7, the so-called continuing claims rose 17,000 to 1.647 million, the claims report showed.
