A ‘help wanted’ sign is displayed in a shop window in Manhattan on December 02, 2022 in New York City.
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The number of Americans filing new claims for unemployment benefits fell sharply last week, suggesting the labor market remains tight despite higher interest rates.
Initial claims for state jobless benefits fell 15,000 to a seasonally adjusted 190,000 for the week ended Jan. 14, the Labor Department said Monday. Economists polled by Reuters had forecast 214,000 claims for the latest week.
Part of the surprise drop in claims may reflect the ongoing challenge of adjusting data for seasonal fluctuations at the start of the year.
Through seasonal volatility, claims remained at levels consistent with a tight labor market, although layoffs accelerated in the technology industry and interest rate-sensitive sectors like finance and housing.
Microsoft said on Wednesday it would cut 10,000 jobs, joining cloud-computing rival Amazon.com, which this month began notifying employees of 18,000 job cuts. Economists caution against reading tech layoffs as causing labor market conditions to deteriorate, arguing that companies are scaling back after hiring workers during the Covid-19 pandemic.
“The tech sector is only going to come back to where it is in 2020 or 2021, which I don’t think is a bad situation,” said John Blevins, a visiting professor at Cornell’s SC Johnson College of Business. “It’s still a very large workforce. These people who are being let go at these major tech companies will find new replacements almost immediately.”
Outside the tech industry, economists say companies are generally reluctant to send workers home after struggling to find workers during the pandemic. He expects the company to cut back on recruiting before taking layoffs.
Indeed, the Federal Reserve’s Beige Book on Wednesday reported that “many companies are hesitant to lay off workers even as demand for goods and services slows and plan to reduce the number of employees through attrition if necessary.”
The claims data covers the period when the government surveyed businesses for the nonfarm payrolls component of the January jobs report.
Claims decreased between the survey weeks of December and January. The economy added 223,000 jobs in January.
Next week’s data on the number of people receiving benefits after the initial week of aid, a proxy for hiring, will shed more light on January’s employment growth. In the last week of Jan 7, the so-called claims continued to rise by 17,000 to 1.647 million, the claims report shows.
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