WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits increased more than expected last week, a further sign that labor market conditions were loosening up as higher borrowing costs dampen demand in the economy.
Initial claims for state unemployment benefits rose 11,000 to a seasonally adjusted 239,000 for the week ended April 8. Economists polled by Reuters had forecast 232,000 claims for the latest week.
Annual revisions to the data published by the government last week showed claims much higher so far this year than had been previously estimated, aligning with a rush of high-profile layoffs in the technology industries as well as other sectors highly sensitive to interest rates.
Claims however remain below the 270,000 level, a breach of which economists say would signal a deterioration in the labor market. Last Friday’s employment report showed a solid pace of job growth in March and the unemployment rate falling back to 3.5%, while wage gains remained moderate.
Though job openings fell below 10 million at the end of February for first time in nearly two years, there were 1.7 vacancies for every unemployed person that month, which could make it easier for some laid off workers to land a job.
There are no signs yet that a tightening in credit conditions following the failure of two regional banks last month has led to job losses. Economists expect small businesses like restaurants, bars and nail salons would be affected by a credit crunch.
Financial markets are betting that the Federal Reserve will increase rates by another 25 basis points at its May 2-3 policy meeting, according to CME Group’s FedWatch tool. That will likely be the last rate hike in the U.S. central bank’s fastest monetary policy tightening campaign since the late 1980s.
The Fed last month raised its benchmark overnight interest rate by a quarter of a percentage point, but indicated it was on the verge of halting further rate increases in a nod to the financial market turmoil. It has hiked its policy rate by 475 basis points since last March from the near-zero level to the current 4.75%-5.00% range.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, dropped 13,000 to 1.810 million during the week ending April 1, the claims report showed.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
