The US job market remains tight despite layoffs in the tech sector

  • Weekly jobless claims fall 4k to 222k
  • Continuing claims increase by 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 jobless claims fell last week, showing the widespread layoffs are coming despite a surge in tech job cuts that has raised fears of an impending recession , stay low.

The Labor Department’s weekly jobless report on Thursday, the latest data on the health of the economy, suggested the job market remained tight. This, combined with solid consumer spending, keeps the Federal Reserve on course to continue raising interest rates, albeit at a slower pace, as inflation begins to ease.

“This is a testament to how tight the job market remains,” said Robert Frick, business economist at Navy Federal Credit Union in Vienna, Virginia.

Initial jobless claims fell by 4,000 to a seasonally adjusted 222,000 in the week ended November 12. Economists polled by Reuters had forecast 225,000 applications last week.

There was an increase in layoffs in the technology sector, at Twitter, at Amazon (AMZN.O) and meta (META.O), Facebook’s parent company, announced thousands of job cuts this month. Companies in interest-rate-sensitive sectors like housing and finance are also shedding workers.

The layoffs are not yet visible in official data. Unadjusted receivables fell 6,101 to 199,603 last week. Claims in California, the epicenter of tech job cuts, rose just 302 last week. Sharp falls in claims were reported in Florida, Georgia, Kentucky, Indiana and Texas, offsetting notable increases in Minnesota and North Carolina.

Economists say companies outside of the tech and housing sectors are hoarding after struggling to find workers in the wake of the COVID-19 pandemic. With 1.9 vacancies for every unemployed person in September, some of the laid-off workers are likely to find new employment quickly.

Goldman Sachs economists dismissed fears that tech layoffs herald an impending recession in a note this week. They argued that tech job openings remained well above their pre-pandemic levels, and also noted that historical layoffs in the industry had not been a leading indicator of a deterioration in the overall job market.

The Fed has raised interest rates by 375 basis points this year from near zero to a range of 3.75% to 4.00% as it struggles to bring inflation back to the US 2% target in the fastest rate hike cycle since Federal Reserve to bring the 1980s.

According to CME Group’s FedWatch tool, financial markets are betting that the Fed will resort to a half-percentage-point rate hike at its December 13-14 meeting.

So far, the economy is weathering the tightening monetary storm, with data on Wednesday showing strong retail sales growth over the past month. This has led economists to expect the policy rate to rise for a long period of time and eventually reach higher levels that will be sustained for a while.

Wall Street stocks traded lower. The dollar rose against a basket of currencies. US Treasury bond prices fell.

unemployment claims

FIGHTS IN THE HOUSING MARKET

The claims data covered the week the government was surveying business firms on the non-farm payrolls component of the November jobs report.

Claims rose marginally between the October and November survey periods, pointing to another month of solid employment growth. The economy created 261,000 jobs in October.

Next week’s data on the number of people receiving benefits after a first week of assistance will shed more light on the November jobs report. So-called ongoing demands, a proxy for hiring, rose 13,000 to 1.507 million in the week ended November 5, the highest since March.

Economists viewed the rise mainly as technical.

“There was little change in the labor market in early November,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

But the housing market is crumbling under the weight of higher borrowing costs as output cools. Factory activity in the mid-Atlantic region continued to decline in November, a report from the Philadelphia Fed showed.

Philly Fed

A third Commerce Department report showed that housing starts fell 4.2% last month to a seasonally adjusted annualized rate of 1.425 million units. Launches fell 8.8% year over year in October.

Single-family housing starts, which account for the largest share of residential construction, plunged 6.1% to 855,000 units, the lowest since May 2020. Single-family housing construction fell in all four regions.

Housing starts for residential projects with five units or more fell by 0.5% to 556,000 units. Multifamily construction has fared better as rising mortgage rates force many prospective homebuyers to stay renters. A key measure of rents rose by the sharpest year-on-year rise on record in October, according to the latest consumer price data.

The interest rate on 30-year fixed-rate mortgages is averaging over 7%, the highest since 2002, according to data from mortgage financing agency Freddie Mac. A survey on Wednesday showed that confidence among homebuilders fell for the 11th straight month in November.

Future housing permits fell 2.4% in October to 1.526 million units. Building permits for single-family homes fell 3.6% to 839,000 units, also the lowest since May 2020. Building permits for housing projects with five units or more fell 1.9% to 633,000 units.

Housing starts and building permits

The number of single-family homes under construction fell, while the stock of completed homes was at its lowest since January, suggesting supply will remain tight even as demand slacks, which could prevent a full-scale price collapse.

“Rising borrowing costs and hesitant homebuilders could exacerbate the nationwide housing crisis in the near term if activity cools below 2019 levels,” said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina.

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

Our standards: The Thomson Reuters Trust Principles.

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