The number of Americans filing new claims for unemployment benefits unexpectedly fell last week as the labor market remained resilient despite higher borrowing costs and mounting fears of a recession.
Initial claims for state unemployment benefits dropped 3,000 to a seasonally adjusted 183,000 for the week ended Jan. 28, the Labor Department said on Thursday. Economists polled by Reuters had forecast 200,000 claims for the latest week.
Claims have been running low this year, consistent with a persistently tight labor market even as the Federal Reserve’s fastest interest rate hiking cycle since the 1980s has raised the risk of a recession by the second half of the year.
The government reported on Wednesday that there were 11 million job openings at the end of December, with 1.9 openings for every unemployed person.
Outside the technology industry and interest-rate sensitive sectors like housing and finance, employers have been reluctant to lay off workers after struggling to find labor during the pandemic, and also because they are optimistic economic conditions will improve later this year.
An Institute for Supply Management report on Wednesday said manufacturers “are indicating that they are not going to substantially reduce head counts as they are positive about the second half of the year.”
The U.S. central bank on Wednesday raised its policy rate by 25 basis points to the 4.50%-4.75% range, and promised “ongoing increases” in borrowing costs. Fed Chair Jerome Powell told reporters that “the economy can return to 2% inflation without a really significant downturn or a really big increase in unemployment.”
The claims report showed the number of people receiving benefits after an initial week of aid, a proxy for hiring, fell 11,000 to 1.655 million during the week ending Jan. 21.
The claims data has no bearing on January’s employment report, scheduled for release on Friday, as it falls outside the survey period. According to a Reuters poll of economists, nonfarm payrolls likely increased by 185,000 jobs last month. The economy created 223,000 jobs in December.
The raft of layoffs in the technology sector pushed up job cuts in January. A separate report on Thursday from global outplacement firm Challenger, Gray & Christmas showed job cuts announced by U.S.-based employers surged 136% to 102,943. That was the highest January total since 2009.
“We’re now on the other side of the hiring frenzy of the pandemic years,” said Andrew Challenger, senior vice president at Challenger, Gray & Christmas. “Companies are preparing for an economic slowdown, cutting workers and slowing hiring.”
The technology sector accounted for 41% of the job cuts, with 41,829 layoffs. Retailers announced 13,000 job cuts, while financial firms planned to lay off 10,603 workers.
Last month, employers announced plans to hire 32,764 workers, mostly in the entertainment/leisure sector, down 37% from December and 58% from a year ago.