WASHINGTON — Fewer Americans filed for unemployment benefits last week as the labor market remains tight, even as the Federal Reserve has tried to cool the economy and inflation by raising interest rates.
Applications for jobless aid in the U.S. for the week ending Jan. 21 fell by 6,000 last week to 186,000, from 192,000 the previous week, the Labor Department reported today. It’s the first time in nine months that number has been below 200,000 in back-to-back weeks.
The four-week moving average of claims, which flattens out some of the week-to-week volatility, declined by 9,250 to 197,500. It’s the first time that number has been below 200,000 since May of last year.
Jobless claims generally serve as a proxy for layoffs, which have been relatively low since the pandemic wiped out millions of jobs in the spring of 2020.
The labor market is closely monitored by the Federal Reserve, which raised interest rates seven times last year in a bid to slow the economy, job growth and bring down stubbornly high inflation.
Earlier this month, the government reported that U.S. employers added a solid 223,000 jobs in December, evidence that the economy remains healthy even as the Fed is rapidly raising interest rates to try to slow economic growth and the pace of hiring. The unemployment rate fell to 3.5%, matching a 53-year low.
Even though it was a solid report, December’s jobs data suggested that the labor market may be cooling enough to aid the Fed’s fight against high inflation. It was the smallest gain in two years, and it extended a hiring slowdown that began last year. Average hourly pay growth eased to its slowest pace in 16 months. That slowdown could reduce pressure on employers to raise prices to offset their higher labor costs.
In forecasts updated last month, the Fed’s policymakers predicted slower growth and higher unemployment for next year and 2024. The unemployment rate is projected to jump to 4.6% by the end of 2023. That would mark a significant increase in joblessness and typically would reflect a recession, which many economists have predicted.
The Fed’s rate hikes last year have made it more expensive for consumers to take out mortgage and auto loans, and raised borrowing rates for credit cards.
Also today, the government reported that the U.S. economy expanded at a 2.9% annual pace from October through December, ending 2022 with momentum despite the pressure of high interest rates and widespread fears of a looming recession.
Mortgage rates are above 6%, essentially double what they were before the Fed began tightening credit. Higher mortgage rates have put the brakes on the housing market, with sales of existing homes declining for 11 straight months.
Though the U.S. labor market remains robust, layoffs have been mounting in the technology sector, which is dealing with falling demand as inflation squeezes both businesses and families.
German software company SAP announced today that it was cutting up to 3,000 jobs worldwide, or about 2.5% of its workforce, after a sharp drop in profits.
IBM announced late Wednesday that it was slashing 3,900 positions. Microsoft announced last week that it is cutting 10,000 workers, almost 5% of its workforce, joining other tech companies that have scaled back their pandemic-era expansions. That followed job cuts previously announced by Amazon, Salesforce, Facebook parent Meta, Twitter and DoorDash.
About 1.68 million people were receiving jobless aid the week that ended Jan. 14, an increase of 20,000 from the week before.