The number of Americans that have been submitting new unemployment benefit applications saw a light increase last week. It indicates that labor market conditions remain stable and bolsters the belief that the Federal Reserve is unable to lower the interest rates in the upcoming week.
While layoffs remain low, the pool of new job opportunities for those who find themselves unemployed is shrinking as employers exercise caution in expanding their workforce. According to a report from the Labor Department released on Thursday, jobless claims have risen to their highest level in over three years of early January.
Jeffery Roach, the chief economist at LPL Financial has noted, “The labor market is historically tight, but certain sectors are slowing down their hiring rates. The data indicates minimal strain in job markets. As long as wage growth continues to outpace inflation, the economy will keep moving forward, and the Fed is unlikely to make as many rate cuts as previously anticipated.”
The initial claims for state unemployment benefits rose by 6,000 reaching a seasonally adjusted total of 223,000 for the week ending January 18. Economists surveyed by Reuters have predicted 220,000 claims for this period.
The increase in claims was partly attributed to the wildfires in Los Angeles, which caused a rise in unadjusted applications in California, while most other states saw declines.
Severe cold weather affecting large regions of the country along with blizzards in the South could lead to a temporary rise in claims in the coming weeks. However, despite these fluctuations, the labor market is expected to maintain its momentum, supporting ongoing economic growth. Stephen Stanley, chief U.S. economist at Santander US Capital Markets stated, “The effects of the California wildfires may have contributed to a slight increase in the latest figures. Further repercussions from that situation are likely in the future, and the historic snowstorm in the South this week will probably add to the claims for the current week”.
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