While layoffs decreased in September, the number of Americans submitting new claims for unemployment benefits increased slightly last week, indicating that the labour market was still tight at the end of the third quarter.
Other data released on Thursday showed that the trade deficit shrank to its lowest level in almost three years in August and that exports of capital goods reached a record high, which improved the outlook for the economy during the previous quarter. The Federal Reserve raised interest rates significantly to stifle demand, but the economy has so far survived. This resiliency increases the chance that the U.S. central bank will increase rates once more by year’s end.
“Demand in the economy continues to strengthen, which can only serve to worry Fed officials even more, and puts the progress in bringing inflation down in jeopardy,” said Christopher Rupkey, chief economist at FWDBONDS in New York.
For the week ending September 30, the Labour Department reported an increase of 2,000 in first claims for state unemployment benefits, bringing the seasonally adjusted total to 207,000. Reuters polled economists, who predicted 210,000 claims for the most recent week.
Claims stayed towards the lower end of their 194,000–265,000 range for the majority of September.
Following the COVID-19 outbreak, employers had trouble finding labour, which made them reluctant to fire their employees. According to a study released on Wednesday by the Institute for Supply Management, employers in the services sector continue to regard the labour market as “very competitive,” with some having trouble filling open positions.
Last week, unadjusted claims decreased by 2,875 to 172,775. Claims in Ohio decreased by 1,629, more than offsetting a 1,650 increase in California thanks to substantial drops elsewhere.
As the United Auto Workers (UAW) strike, now in its third week, restricts supply chains and causes businesses to temporarily lay off more non-striking workers, claims may increase this month. Due to the effects of the strike, Ford Motor, General Motors, and Chrysler parent Stellantis have furloughed and fired hundreds of employees.
Even if things are still tight, the labour market is progressively moderating. In August, there were 1.51 job opportunities for every unemployed individual, according to official data released on Tuesday, and the number of open posts surged to its highest level in two years.
According to a separate survey released on Thursday by the international outplacement agency Challenger, Grey & Christmas, American businesses disclosed 47,457 job cutbacks in September, a decrease of 37% from August. However, announced layoffs were 58% greater than they were during the same time previous year. In the third quarter, employers declared 146,305 job cutbacks, which is 22% fewer than the quarter from April to June.
Given the health of the labour market, the Fed may decide to maintain higher interest rates for some time. The majority of experts think the central bank has stopped raising rates. It has increased its benchmark overnight interest rate by 525 basis points since March 2022 to the present range of 5.25%-5.50%.
According to the claims report, the number of people receiving unemployment benefits after a first week of assistance—a proxy for hiring—fell 1,000 to 1.664 million in the week ending September 23. The claims data are irrelevant to Friday’s employment report for September because they are outside the sampling period.
But in September, claims fell below 220,000, which some economists said indicated that job growth would exceed expectations.
An analyst survey conducted by Reuters indicates that nonfarm payrolls likely expanded by 170,000 jobs in September after increasing by 187,000 in August. It is anticipated that the jobless rate will decrease to 3.7% from 3.8% in August.
We anticipate payroll growth of 210,000 in September, according to Oscar Munoz, chief U.S. macro strategist at TD Securities in New York.
The trade deficit decreased 9.9% to $58.3 billion in a third report from the Commerce Department, marking its lowest amount since September 2020. The trade deficit was expected to close to $62.3 billion by economists. The goods deficit, adjusted for inflation, fell by 5.1% to $83.9 billion.
To $256.0 billion, exports of goods and services rose 1.6%. Exports of goods increased 1.8% to $171.5 billion, with capital goods seeing record-high shipments. But food, feed, and beverage exports fell to their lowest level since August 2020.
Services exports increased $1.0 billion to $84.5 billion, the biggest amount ever, mostly due to growth in the tourism and banking sectors.
To $314.3 billion, imports of goods and services decreased by 0.7%. The import of goods decreased by 0.9% to $256.0 billion, with falls in both capital and consumer goods imports, possibly signalling a softer domestic demand due to rising borrowing prices.
The decline in imports of consumer products was caused by cell phones and other home items. Imports of capital goods fell as a result of falling demand for semiconductors and electrical equipment.
Travel and other business services drove the $0.1 billion increase in service imports to $58.4 billion. Transportation service imports decreased. To reach $26.2 billion, the services surplus climbed by $1 billion, marking its largest level since March 2018.
After being neutral between April and June, economists predict that trade will boost gross domestic product growth by at least a full percentage point in the third quarter.
The third-quarter GDP growth forecast from Goldman Sachs was increased by 0.3 percentage points to a 3.7% annualised rate. In the second quarter, the economy expanded at a 2.1% annual rate.