The Labor Department announced that the number of Americans filing for new unemployment benefits decreased by 20,000 to 192,000 in the week ending March 11th, surpassing the Reuters economists’ forecast of 205,000 claims.
Despite the significant reduction in employment in technology firms, the labor market has remained strong, and employers have been reluctant to lay off workers, given the shortage of labor during the COVID-19 pandemic.
Moreover, labor market tightness, demonstrated by 1.9 job openings for each unemployed individual in January, along with stubbornly high inflation, argue for the Federal Reserve to continue increasing interest rates next week.
Despite the solid labor market, the recent collapse of two regional banks has created fears of contagion in the banking sector, casting a shadow over the economy’s future.
The stock market has been impacted, and there is uncertainty about the Fed’s next move, with CME Group’s FedWatch tool suggesting policymakers could pause the tightening campaign or raise rates by a quarter-point.
Last week, the market bet on a 50 basis points rate hike, but those expectations have been revised downwards, as the unemployment rate rose to 3.6% in February from 3.4% in January, and wage gains slowed.
The central bank has already increased its benchmark overnight interest rate by 450 basis points since last March, from near-zero to the current 4.50%-4.75% range.
Meanwhile, the claims report revealed that the number of people receiving benefits after the first week of aid, a proxy for hiring, decreased by 29,000 to 1.684 million during the week ending March 4th.
The so-called continuing claims remain low, indicating that some laid-off employees could be easily finding new work.