US Jobless Claims Rise to 198,000, Point to Tight Labor Market – Labor Department

The US labor market continues to show resilience despite the ongoing economic uncertainty due to the COVID-19 pandemic. Initial filings for unemployment insurance edged higher last week, but still remained generally low in a tight labor market, according to a report released by the Labor Department on Thursday.

For the week ending March 25th, jobless claims totaled 198,000, up 7,000 from the previous period, and slightly higher than the estimate of 195,000. Although the number was slightly higher than expected, it indicates that companies are slow to lay off workers despite expectations that the unemployment rate will rise through the year.

Continuing claims, which run a week behind, also edged up 4,000 to 1.689 million. However, this figure was still below the estimated 1.6935 million.

The four-week moving average of weekly claims, which smooths volatility in the numbers, increased slightly to 198,250 but has been below 200,000 since mid-January. The Labor Department said that a tight labor market will lead to further rate hikes from the Federal Reserve, although the FOMC is likely to proceed cautiously given the uncertain impact on the economy from recent stress in the banking system.

Separately, a report showed that growth was a bit less strong to close 2022 than previously thought. The final Commerce Department reading for gross domestic product showed the economy grew at a 2.6% annualized rate in the fourth quarter, slightly below the previous estimate of 2.7%. This change came primarily due to downward revisions in consumer spending and exports, the department said.

Looking ahead, the Labor Department is scheduled to release its more closely watched monthly employment report for March next Friday. Economists currently expect employment to slip by 8,000 jobs in March after surging by 311,000 jobs in February, while the unemployment rate is expected to dip to 3.5% from 3.6%.

Although hiring in the US economy remains strong, there appears to be the potential for more slack in hiring trends set for the spring and summer months, according to Stuart Hoffman, a senior economic advisor at PNC. He added that any newly laid-off workers are not as likely to be quickly rehired as businesses assess their plans to weather what is expected to be a mild recession in the second half of this year.

The relatively benign claims numbers come despite aggressive Federal Reserve efforts to slow down inflation. In large part, the central bank is targeting a labor market beset by a sharp supply-demand imbalance in which there are nearly two open jobs for every available worker.