By Lucia Mutikani
WASHINGTON (Reuters) -The number of Americans filing new applications for unemployment benefits increased moderately last week, consistent with steadily easing labor market conditions, though opportunities for those out of work are becoming scarce amid tepid hiring.
Initial claims for state unemployment benefits rose 11,000 to a seasonally adjusted 219,000 for the week ended February 1, the Labor Department said on Thursday. Economists polled by Reuters had forecast 213,000 claims for the latest week.
“There is nothing to worry about here,” said Carl Weinberg, chief economist at High Frequency Economics.
Unadjusted claims increased 11,370 to 239,690, with applications in New York soaring by 4,092. Filings rose by 3,999 in California, likely reflecting some residual effects from the recent fires in Los Angeles. Claims dropped by 1,343 in New Jersey. There were no significant increases or decreases for the rest of the states, territories and the District of Columbia.
Labor market resilience is the driving force behind the economic expansion and has given the Federal Reserve room to pause interest rate cuts while policymakers assess the impact of the fiscal, trade and immigration policies of President Donald Trump’s administration, which economists view as inflationary.
The U.S. central bank left its benchmark overnight interest rate unchanged in the 4.25%-4.50% range last month, having reduced it by 100 basis points since September, when it embarked on its policy easing cycle. The policy rate was hiked by 5.25 percentage points in 2022 and 2023 to tame inflation.
U.S. stocks opened modestly higher. The dollar rose against a basket of currencies.
Low layoffs are underpinning the labor market, though work opportunities are becoming more scarce for those who are unemployed. The government reported on Tuesday that there were 1.1 job openings for every unemployed person in December, down from 1.15 in November.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 36,000 to a seasonally adjusted 1.886 million during the week ending January 25, the claims report showed.
LACKLUSTER HIRING
Though business sentiment perked up in the aftermath of Trump’s victory in November, hiring plans have remained lackluster amid expectations that demand will slow this year because of still-restrictive monetary policy and higher prices from tariffs.
A report from global outplacement firm Challenger, Gray & Christmas on Thursday showed U.S. employers announced plans to hire 6,089 workers in January, down 24% from December. Plans were up 13% from January 2024, which was the lowest reading for the month of January on record.
The claims data have no bearing on January’s employment report, scheduled to be released on Friday, as they fall outside the survey period. Frigid temperatures and the wildfires in California are expected to have held back job growth last month.
Nonfarm payrolls likely increased by 170,000 jobs after surging by 256,000 in December, a Reuters survey of economists showed. The unemployment rate is forecast to be unchanged at 4.1%.
The government will also publish its annual payrolls benchmark revision and introduce new population weights to the household survey, from which the unemployment rate is derived.
It estimated last August that the level of employment for the 12 months through March would be lowered by 818,000 jobs, but subsequent updates to the source data led economists to expect that the reduction would amount to about 675,000 jobs.
There was some discouraging news on inflation. A separate report from the Labor Department’s Bureau of Labor Statistics showed worker productivity growth slowed more than expected in the fourth quarter, driving up labor costs.
Nonfarm productivity, which measures hourly output per worker, increased at a 1.2% annualized rate in the fourth quarter after growing at an upwardly revised 2.3% pace in the July-September quarter.
Economists had forecast productivity would advance at a 1.4% rate after increasing at a previously reported 2.2% pace in the third quarter. Productivity increased at a 1.6% rate from a year ago. It grew 2.3% in 2024, accelerating from 1.6% in 2023.
Productivity has expanded at a 1.8% rate since the fourth quarter of 2019, higher than the 1.5% pace in the prior business cycle that ran from the fourth quarter of 2007 through the fourth quarter of 2019. It is, however, below the long-term rate of 2.1%.
An upswing in productivity that started in 2023 led policymakers not to be overly concerned about wages as a source of inflation. Progress lowering inflation to the Fed’s 2% target stalled late last year.
Unit labor costs – the price of labor per single unit of output – surged at a 3.0% rate in the October-December quarter. That followed a 0.5% growth pace in the third quarter, which was revised down from the previously reported 0.8% rate.
Labor costs increased at a 2.7% rate from a year ago. They grew 2.6% in 2024, up from 2.2% in 2023. Hourly compensation increased at a 4.2% rate last quarter after advancing at a 2.9% pace in the third quarter.
“The upward shift in labor costs has the potential to weigh on job growth in 2025, as firms look for ways to reduce expenses and maintain profits,” said Ben Ayers, senior economist at Nationwide.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)
