The number of Americans filing for unemployment benefits last week fell to the lowest level since September 2022, according to data released by the Labor Department on Thursday. The drop in jobless claims signals ongoing strength in the labor market despite recent layoffs in the technology and finance sectors.
Jobless Claims Hit 16-Month Low
Initial jobless claims, a proxy for layoffs across the economy, dropped by 16,000 to 187,000 in the week ending January 14, lower than economists’ forecasts of 205,000 claims. The reading is the lowest since claims hit the 166,000 mark in the week ending September 24, 2022.
The four-week moving average, which smooths out week-to-week volatility, also fell by 6,500 to 206,750 last week. That is also the lowest level for this average since September 2022.
Table 1: Key Statistics on Latest Jobless Claims Data
|Initial Jobless Claims
The sharp drop in claims indicates that companies are holding on to workers even amid economic uncertainty. Several major technology and finance companies announced significant job cuts in January, but the data suggests these layoffs have been limited versus the overall size of the labor force.
Unemployment Rolls Shrink Further
The number of people already collecting unemployment benefits, known as continuing claims, also declined in the first week of 2023. Continuing claims for the January 7 week fell by 63,000 to 1.65 million, hitting the lowest level since the week ending June 25, 2022.
The decline in continuing claims suggests that most people who lose their jobs can find new employment relatively quickly despite high inflation and rapidly rising interest rates.
The insured unemployment rate for the January 7 week fell 0.1 percentage point to 1.1%, matching a historic low touched in early December 2022.
Outlook for Job Market Remains Strong
Economists say the decline in claims reflects the economy’s continued resilience despite aggressive monetary policy tightening by the Federal Reserve intended to cool demand and ease price pressures.
The U.S. labor market entered 2023 on solid ground even as warning signs emerged that the historically strong jobs sector may be cooling slightly. Employers added a better-than-expected 223,000 nonfarm jobs in December, while the unemployment rate dropped to 3.5%, matching pre-pandemic lows last seen in 1969 according to historical data.
“The further decline in jobless claims shows employers are holding tightly onto workers amid extremely tight labor market conditions,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics. “While job growth is expected to slow this year in response to more restrictive monetary policy, employers will remain reluctant to lay off workers that have been so difficult to hire.”
Most economists expect the U.S. to skirt a recession or enter only a shallow downturn, with the tight labor market a key buffer against broader economic turmoil.
Table 2: Jobless Claims Levels Over Past Year
|January 14, 2023
|December 31, 2022
|September 24, 2022
|January 15, 2022
Risks Remain Despite Encouraging Data
Still, risks remain tilted to the downside this year for both economic growth and the job market. Many economists expect higher rates to bite harder in early 2023, eventually leading employers to pare back hiring plans and potentially lay off more workers.
There were also warnings in Thursday’s report. Claims for California, Virginia, Texas and New York were estimated last week, which could make the data more volatile.
But for now, the low level of claims remains a source of optimism for the economy’s resilience, especially in light of recent high profile layoff announcements. As long as consumers keep spending and businesses avoid widespread job cuts, the economy may avoid plunging into recession.
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