U.S. labor market remains tight despite tech layoffs

  • Weekly jobless claims fall 4,000 to 222,000
  • Continuing claims up 13,000 to 1.507 million
  • Housing starts fall 4.2% in October; permits fall 2.4%

WASHINGTON, Nov 17 (Reuters) – The number of Americans filing new claims for jobless benefits fell last week, suggesting widespread layoffs remained low even as a surge in layoffs in the tech sector stoked fears of a looming recession.

The Labor Department’s weekly jobless claims report on Thursday is the most timely data on the health of the economy, suggesting that the labor market remains tight. That, along with solid consumer spending, has the Fed on track to continue raising interest rates, albeit at a slower pace amid signs that inflation is starting to fade.

“It’s evidence that the labor market remains tight,” said Robert Frick, a business economist at Naval Federal Credit Union in Vienna, Virginia.

Initial claims for state unemployment benefits fell 4,000 to a seasonally adjusted 222,000 for the week ended Nov. 8. 12. Economists polled by Reuters forecast 225,000 jobless claims in the latest week.

Layoffs have increased in the tech sector, with Twitter, Amazon (AMZN.O) and Facebook parent Meta (META.O) announcing thousands of layoffs this month. Companies in rate-sensitive industries such as real estate and finance are also laying off workers.

So far, the number of layoffs has not been apparent in official figures. Unadjusted initial jobless claims fell 6,101 to 199,603 last week. Initial jobless claims in California, the epicenter of tech layoffs, rose by just 302 last week. Jobless claims reported sharp declines in Florida, Georgia, Kentucky, Indiana and Texas, offsetting notable increases in Minnesota and North Carolina.

Businesses outside the technology and housing sectors are hoarding workers after struggling to find labor in the wake of the COVID-19 pandemic, economists say. With 1.9 job openings for every unemployed person in September, some laid-off workers may be finding new jobs quickly.

Economists at Goldman Sachs dismissed fears that tech layoffs are a sign of a looming recession in a report this week. They argue that tech job vacancies remain well above pre-pandemic levels, noting that layoffs in the sector have historically not been a leading indicator of overall labor market deterioration.

The Fed has raised policy rates by 375 basis points this year from near zero to a range of 3.75%-4.00% in an effort to bring inflation back to the Fed’s 2% target, in what has become the fastest rate hike cycle since the 1980s .

Financial markets are betting the Fed will cut its rate hike to half a percentage point on Dec. 12. Policy meeting on the 13-14, according to the CME Group’s FedWatch tool.

The economy is weathering the storm of tightening monetary policy so far, with data on Wednesday showing strong retail sales growth last month. This has led economists to expect that policy rates could rise for a prolonged period, eventually reaching higher levels and remaining there for some time.

Stocks on Wall Street were lower. The dollar rose against a basket of currencies. U.S. Treasury prices fell.

apply for unemployment benefits

real estate market struggling

The jobless claims cover the week when the government surveyed businesses for the nonfarm payrolls portion of the November jobs report.

Initial jobless claims rose slightly during the October and November survey periods, pointing to another solid month of job growth. The economy created 261,000 jobs in October.

Next week’s data on the number of people receiving benefits after the initial week of aid will provide more information to the November jobs report. Continuing claims, which represent hiring, rose by 13,000 to 1.507 million in the week ended Nov. 10. 5, the highest level since March.

Economists see the rise as mostly technical.

“There was little movement in the labor market in early November,” said Conrad de Quedros, senior economic adviser at Brean Capital in New York.

But the housing market is collapsing under the weight of rising borrowing costs, while manufacturing is cooling. Factory activity in the mid-Atlantic region fell further in November, according to a report from the Philadelphia Fed.

Federal Reserve Bank of Philadelphia

A third report from the Commerce Department showed housing starts fell 4.2% to a seasonally adjusted annual rate of 1.425 million units last month. The operating rate in October fell by 8.8% year-on-year.

Starts for single-family homes, which account for the largest share of homebuilding, fell 6.1% to a rate of 855,000 units, the lowest level since May 2020. Single-family housing starts declined in all four regions.

Starts for housing projects of five or more units slipped 0.5% to a rate of 556,000 units. Multifamily construction fared better as surging mortgage rates forced many would-be homebuyers to stay in rent. A key measure of rents hit an all-time high in October from a year earlier, according to the latest consumer price data.

The 30-year fixed mortgage rate averaged more than 7%, the highest level since 2002, according to mortgage finance agency Freddie Mac. A survey on Wednesday showed confidence among single-family homebuilders fell for the 11th straight month in November.

Permits to build future homes fell 2.4% to 1.526 million units in October. Single-family building permits fell 3.6% to 839,000 units, also the lowest level since May 2020. Permits for housing projects with five or more units fell 1.9% to 633,000 units.

Housing Starts and Building Permits

The number of single-family homes under construction fell, while the inventory of completed homes was the lowest since January, suggesting supply will remain tight even as demand slows, which could prevent an outright decline in prices.

“If activity cools below 2019 levels, higher borrowing costs and homebuilder hesitation could exacerbate the national housing shortage in the near term,” said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina.

Reporting by Lucia Mutikani; Editing by Paul Simao and Andrea Ricci

Our Standards: The Thomson Reuters Trust Principles.

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