Last week, fewer Americans filed for unemployment benefits. This is because the job market is still doing well, even though the Federal Reserve is trying to slow down the economy and reduce inflation.
The Labor Department said Thursday that the number of people who filed for unemployment benefits in the U.S. dropped from 212,000 the week before to 192,000 the week of March 11.
The average number of claims over the past four weeks, which smooths out some of the week-to-week changes, dropped by 750 to 196,500, staying below the 200,000 mark for the eighth week in a row.
People look at the number of people applying for unemployment benefits as a sign of layoffs in the U.S.
Analysts at Oxford Economics said in a note to clients that there are still few signs that the recent rise in layoff announcements, especially in the tech sector, is leading to a rise in unemployment.
“Many layoffs that are announced don’t happen, and those who are laid off quickly find work elsewhere, which shows that there is still an imbalance between the demand for and supply of workers,” the analysts wrote.
At its meeting in February, the Fed raised its main lending rate by 25 basis points. This was the eighth straight rate increase in the Fed’s fight against inflation, which has been going on for a year. With recent data showing that the rate hikes haven’t done much to bring down inflation and even less to cool down the economy and job market, many analysts thought the Fed would raise rates by another half-point at its meeting next week.
But the second-and third-largest bank failures in U.S. history happened in the last week, and rising interest rates have been blamed for most of them. This has led some economists to think that Fed officials will be more cautious next week and either raise rates by 25 basis points or not at all.
The benchmark rate set by the central bank is now between 4.5 and 4.75 percent, which is its highest level in 15 years. Before last week’s trouble in the banking sector, the Fed had said that it was likely that rates would go up twice more this year. Some analysts had even predicted three increases that could push the lower end of that rate to 5.5%.
The Fed raises interest rates to slow down the economy, the job market, and wages, which keeps prices down. But so far, none of these things have happened, at least not as much as the central bank had hoped.
The Fed’s goal for inflation is 2%, but it is still more than double that. The economy is growing and adding jobs at a healthy rate.
The government said last month that employers added 311,000 jobs in February, which was less than January’s huge gain but still enough to keep putting pressure on the Federal Reserve to raise interest rates quickly to fight inflation. From a 53-year low of 3.4%, the unemployment rate went up to 3.6%.
Fed policymakers think that the unemployment rate will go up to 4.6% by the end of this year. This is a big jump, which is usually seen during recessions.
Even though the U.S. job market is still strong, there have been more and more layoffs in the technology sector. This is because many companies hired too many people after the pandemic boom. In the past few months, layoffs have been announced by IBM, Microsoft, Amazon, Salesforce, Twitter, and DoorDash.
This week, Facebook’s parent company, Meta, announced that it was cutting another 10,000 jobs. This is on top of the 11,000 jobs that were cut in November. The social media giant also said that it would not hire people to fill 5,000 open jobs.
Interest rate hikes by the Fed have hurt the real estate market the most. Higher mortgage rates, which have been getting closer to 7% again in the past few weeks, have slowed home sales for the past year. That’s almost the same as the Fed’s rate hikes, which began in March of last year.
During the week that ended March 4, about 1.68 million people were getting help for being unemployed. This was 29,000 less than the week before. This number is close to what it was before the pandemic.
Featured Image: Unsplash @ Scott Graham