By Lucia Mutikani
WASHINGTON, Nov 12 (Reuters) – The number of Americans filing new claims for unemployment benefits increased last week, but remained at a level consistent with a stable or even strengthening labor market, allowing the Federal Reserve to focus on fighting inflation.
Economists expect layoffs to remain low through the end of the year, though seasonal volatility related to the holiday season could cause some spikes in the claims data. The government last week reported a surge in nonfarm payrolls in October and a decline in the unemployment rate to 4.1% from 4.2% in September.
“Firms are continuing to hold on to labor,” said Olivia Cross, senior US economist at Pantheon Macroeconomics. “We expect layoffs to remain low through the fourth quarter, but then come under some pressure next year in response to the recent tightening of financial conditions and the growing use of AI by firms.”
SMALLER WORKFORCE
Initial claims for state unemployment benefits rose 9,000 to a seasonally adjusted 200,000 for the week ended November 7, the Labor Department said on Thursday. Economists polled by Reuters had forecast 195,000 claims for the latest week.
Claims have stayed at or below 200,000 since mid-September and remain close to the 189,000 level touched in mid-July, the lowest since 1969, raising the prospect that the labor market could be tightening. But with wages growing at a moderate pace, some economists do not believe that is the case.
Others argue that a smaller workforce, due to retirements and the Trump administration’s immigration crackdown, is the key driver of the historically low level of claims.
“A generally smaller labor force could mean fewer workers to file for unemployment insurance,” said Veronica Clark, an economist at Citigroup. “Of course, this would still be consistent with a low unemployment rate, with continuing claims suggesting the unemployment rate may even fall further towards around 4.0% in data by early 2027.”
The claims report showed that the number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, fell 20,000 to a seasonally adjusted 1.697 million during the week ended October 31. But the so-called continuing claims do not include some unemployed people, such as recent college graduates and others who have little or no work history.
Some people might also have exhausted their eligibility for benefits, limited to 26 weeks in most states, keeping continuing claims at relatively low levels. The median duration of unemployment jumped to 11.9 weeks in October, the longest since November 2021, from 11.5 weeks in September.
“A low hiring rate means those who are unemployed are spending longer finding alternative work,” said Michael Pearce, chief US economist at Oxford Economics. “There’s little in the incoming labor market data to trouble officials at the Fed, who will remain squarely focused in the near term on the inflation outlook.”
Government data this week showed consumer prices rising more than expected in October. Financial markets have nearly priced in a Fed 25-basis-point rate hike in December, and they expect another increase in January, CME Group’s FedWatch tool showed. The Fed left its benchmark overnight interest rate in the 3.75%-4.00% range last month.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)
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