U.S. weekly jobless claims rise modestly; third-quarter GDP revised up

WASHINGTON, Dec 22 (Reuters) – The variety of Americans submitting new claims for unemployment advantages elevated lower than anticipated final week, pointing to a still-tight labor market, whereas the financial system rebounded sooner than beforehand estimated within the third quarter.

Labor market energy, which additionally was underscored by some shrinking of unemployment rolls in early December after largely increasing since October, raises the chance that the Federal Reserve may proceed elevating rates of interest to the next degree and maintain them there for some time because it tackles inflation.

“The economy isn’t quite as close to death’s door as markets had thought,” stated Christopher Rupkey, chief economist at FWDBONDS in New York. “The Fed may well need to raise interest rates even higher in 2023 because the economy isn’t slowing so upward price pressures may persist.”

Initial claims for state unemployment advantages rose 2,000 to a seasonally adjusted 216,000 for the week ended Dec. 17, leaving the majority of the prior week’s decline intact, Labor Department knowledge confirmed on Thursday.

Economists polled by Reuters had forecast 222,000 claims for the newest week. Claims have swung up and down in current weeks, however have remained under the 270,000 threshold, which economists stated would elevate a purple flag for the labor market.

A raft of layoffs within the expertise sector and interest-rate delicate industries like housing haven’t had a cloth impression on claims. Unadjusted claims dropped 4,064 to 247,867 final week, amid large declines in California, Indiana, Ohio and Texas, which offset a big improve in Massachusetts.

Fed Chair Jerome Powell final week stated “it feels like we have a structural labor shortage out there.” The U.S. central financial institution final week hiked its coverage fee by 50 foundation factors to a 4.25%-4.50% vary, the very best since late 2007. Fed officers anticipate the speed to rise to between 5.00% and 5.25% subsequent 12 months.

U.S. shares opened decrease. The greenback was regular towards a basket of currencies. U.S. Treasury costs fell.

HOARDING WORKERS

The claims knowledge lined the interval throughout which the federal government surveyed enterprise institutions for the nonfarm payrolls element of December’s employment report.

Claims fell reasonably between the November and December survey weeks, suggesting one other month of strong employment good points. Job development has averaged 392,000 monthly this 12 months. Data subsequent week on the variety of folks on unemployment rolls will supply extra clues on the state of hiring in December.

Economists imagine that firms are prone to reduce on hiring earlier than embarking on layoffs. Employers have been usually reluctant to put off employees after struggling to seek out labor through the COVID-19 pandemic.

The claims report confirmed the variety of folks receiving advantages after an preliminary week of help fell 6,000 to 1.672 million within the week ending Dec. 10, retreating from a 10-month excessive. The so-called persevering with claims, a proxy for hiring, had trended greater since early October.

Some economists had seen the regular rise in persevering with claims as an indication of warning amongst companies as they braced for a dreaded recession subsequent 12 months. But others had argued towards studying this as proof of easing labor market circumstances, noting that the majority employees most well-liked to not begin a brand new job through the vacation interval and firms additionally quickly shut right now.

Labor market energy helps to underpin the financial system by producing strong wage good points, that are contributing to greater shopper spending. A second report from the Commerce Department on Thursday confirmed the financial system rebounded within the third quarter after contracting within the first half of the 12 months.

Gross home product elevated at a 3.2% annualized fee final quarter, the federal government stated in its third estimate of GDP. That was revised up from the two.9% tempo reported final month. The financial system had contracted at a 0.6% fee within the second quarter.

The upward revision to GDP final quarter mirrored upgrades to shopper spending, enterprise funding in addition to state and native authorities outlays.

Despite mounting recession fears and a housing market hunch, development estimates for the fourth quarter are as excessive as a 2.7% tempo, with customers doing the heavy lifting, additionally buttressed by financial savings gathered through the pandemic.

Business spending on tools has additionally remained resilient regardless of greater borrowing prices.

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama

Our Standards: The Thomson Reuters Trust Principles.