WASHINGTON, Sept 19 (Askume) – The number of new U.S. jobless claims fell to a four-month low last week, reflecting solid job growth in September and confirming sustained economic expansion in the third quarter.
The Labor Department’s weekly unemployment claims report on Thursday, the latest data on the health of the economy, also shows job losses are falling to levels last seen in early June.
Fed Chairman Powell said the Fed will cut interest rates on Wednesday
“These solid data confirm the message delivered by Fed Chairman Powell yesterday,” said Carl Weinberg, chief economist at High Frequency Economics.
“The labor market is softening, but it’s not causing the explosive growth that people expected in a recession. The goal of Fed policy is to support the job market before a recession.”
The US Labor Department reported on Thursday that initial jobless claims fell by 12,000 to a seasonally adjusted 219,000 in the week ended September 14, the lowest level since mid-May. Economists polled by Askume expect 230,000 jobless claims in the latest week.
Unadjusted jobless claims rose by 6,436 to 184,845 last week, with notable increases in California, Texas and New York offsetting a decline of 2,055 people in Massachusetts.
The labor market has deteriorated significantly, with hiring falling sharply and job openings shrinking, raising concerns that deteriorating conditions could undermine economic expansion. However, layoffs remain low, helping to support the economy through steady consumer spending.
Economic growth is expected to accelerate to an annual rate of about 3.0% in the third quarter. Economic growth was 3.0% in the second quarter, well above the 1.8% rate that Fed officials consider to be long-term, non-inflationary potential.
The central bank raised its benchmark overnight rate by 525 basis points in 2022 and 2023.
Claims are not much changed since falling from an 11-month high of 250,000 in late July, which economists attribute largely to temporary factory closures in the auto industry.
They broadly follow last year’s pattern, and economists say seasonal adjustment issues are behind the growth.
“That’s the main reason these numbers are good, so without a lot of weakness in the labor market, we’re probably going to see that in the coming months,” said JPMorgan economist Abel Reinhart.
Boeing Co. ‘s (BAN) temporary furlough could cause claims to rise in the coming weeks.
The airline said on Wednesday it would temporarily furlough thousands of employees, including “a large number of U.S. senior executives, managers and employees.” Other planes that were for sale were also put on hold.
“The holidays … could impact (claims) the week ending Sept. 28,” Reinhart said. In addition, the strike could slow work at Boeing suppliers, resulting in more claimants.
Wall Street remains bullish. The US dollar gained against all currencies. US Treasury yields rose.
Salary Survey Week
Jobless claims data comes from the week when the government surveys business establishments in response to the nonfarm payrolls data in the September jobs report. Jobless claims declined significantly during the August and September survey weeks.
Non-agricultural job opportunities increased by 142,000 in August, lower than the average monthly gain of 202,000 over the past 12 months.
The claims report showed that the number of people receiving benefits after the first week of aid, a measure of appointments, fell by 14,000 to a seasonally adjusted 1.829 million in the week ended Sept. 7, the lowest level since early June for the month.
So-called continuing claims have fallen from a 2½-year high in July.
This surge is largely attributed to a policy change in Minnesota that allowed the state’s non-teaching workers to apply for unemployment benefits during the school summer holidays. Next week’s jobless claims data may provide more clues about the state of the labor market in September.
While the labor market is improving, the housing market is struggling to get back on its feet as potential buyers remain on the sidelines amid persistently high home prices despite improved supply.
A separate report from the National Association of Realtors showed existing home sales fell 2.5% in August to a seasonally adjusted annual rate of 3.86 million units, the lowest level in 10 months. The median price of an existing home rose 3.1% from a year earlier to $416,700, the highest level on record in August.
Falling mortgage rates, which have reached a 1-1/2-year low, may prompt more homeowners to put their homes on the market for sale. Most homeowners have mortgage rates below 4%, and the so-called “rate lock” has led to a shortage of supply in the secondary housing market. However, the low cost of borrowing may increase demand more than supply, keeping home prices high.
“The real problem with housing is that we don’t have enough housing, and that will continue to be the case,” Powell told reporters on Wednesday. “This is not something the Fed can really solve, but I think as we normalize interest rates, you’ll see the real estate market normalize as well,” he added.
Housing inventory rose 0.7% to 1.35 million units last month. Supply increased by 22.7% compared to the same period last year.
Nancy Vanden Houten, chief US economist at Oxford Economics, said: “With mortgage rates approaching 6% and the Fed cutting rates significantly, mortgage rates are likely to fall further and we think more sellers will wait and see.”
“The buildup in inventory will impact future home price growth, but we anticipate that any price declines will be offset by increased demand due to low interest rates.”
