By Lucia Mutikani
WASHINGTON (Reuters) -The number of Americans filing new applications for unemployment benefits fell to a seven-month low last week, pointing to still-low layoffs, though the labor market is struggling to generate enough jobs for those out of work amid economic uncertainty.
The absence of labor market deterioration in the weekly jobless claims report from the Labor Department on Wednesday argued against the Federal Reserve cutting interest rates again next month, with inflation still elevated, economists said.
U.S. central bank officials are divided over whether to lower borrowing costs further, though recent comments from top policymakers have shifted market expectations strongly in favor of another quarter-point reduction at the December 9-10 meeting.
“No one can construe any story about a surge in layoffs from this report,” said Carl Weinberg, chief economist at High Frequency Economics. “The message to the Fed from this data point is that there is no reason to rush to cut rates in December.”
Initial claims for state unemployment benefits dropped 6,000 to a seasonally adjusted 216,000 for the week ended Nov. 22, the lowest level since April. Economists polled by Reuters had forecast 225,000 claims for the latest week.
The report was released a day early because of the Thanksgiving holiday on Thursday. Unadjusted claims jumped 25,712 to 243,992 last week. The increase, however, was less than the 32,642 rise that had been expected by the seasonal factors, the model used by the government to strip out seasonal fluctuations from the data.
Unadjusted claims soared in California and there were notable increases in Illinois, New York and Pennsylvania.
Economists say President Donald Trump’s aggressive trade and immigration policies had created an environment where businesses are reluctant to lay off or hire more workers, leading to what they and policymakers call a “no hire, no fire” labor market.
But some companies, including Amazon, are stepping up job cuts as they integrate artificial intelligence into some roles. Economists expect these job cuts could show up in the claims data next year, though filings have not always in the past increased in tandem with announced layoffs.
Despite the low level of layoffs, labor market slack is steadily rising. The number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, increased 7,000 to a seasonally adjusted 1.960 million during the week ending November 15, the claims report showed. The so-called continuing claims covered the period during which the government surveyed households for November’s unemployment rate.
The government has extended the data collection period for November’s employment report, including for nonfarm payrolls, following the recently ended 43-day shutdown.
November’s employment report will be released on Dec. 16, and will include October nonfarm payrolls. There will be no unemployment rate for October as the longest shutdown in history prevented the collection of the household survey data.
U.S. stocks opened higher. The dollar gained versus a basket of currencies. U.S. Treasury prices rose.
HIRING REMAINS TOO WEAK
Continuing claims increased between the October and November survey period. A survey from the Conference Board on Tuesday showed its labor market measure, which correlates with the Labor Department’s unemployment rate, worsening in November.
“The latest claims data indicate hiring remains too weak to absorb the low numbers of people losing their jobs,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
“Unemployment likely is rising faster than the claims data would usually imply, given that recent graduates who are struggling to find their first job and former federal workers who volunteered for buyout offers earlier this year are ineligible to claim.”
The government reported last week that the unemployment rate increased to 4.4% in September from 4.3% in August.
Though businesses are reluctant to boost hiring, they are spending more on equipment, underpinning the economy. A separate report from the Commerce Department’s Census Bureau showed non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, jumped 0.9% in September after an upwardly revised 0.9% increase in August.
Economists had forecast these so-called core capital goods orders rising 0.2% after a previously reported 0.4% increase in August. The report was delayed by the recently ended 43-day shutdown of the government.
There were strong increases in orders for computers and electronic products, electrical equipment, appliances and components as well as transportation equipment and primary metals. But orders for machinery barely rose.
There have been wild swings in core capital goods orders this year as businesses responded to Trump’s sweeping import duties. Business surveys showed the tariffs have undercut manufacturing, which accounts for 10.2% of the economy. But a surge in AI investment has boosted some segments of manufacturing.
Shipments of core capital goods soared 0.9% after dipping 0.1% in August. Business spending on equipment increased at a robust pace in the first half of the year. Economists expect investment in equipment was solid in the third quarter.
The Atlanta Federal Reserve is forecasting gross domestic product increased at a 4.0% annualized rate in the July-September quarter. The delayed third-quarter GDP report will be released on Dec. 23. The economy grew at a 3.8% pace in the second quarter.
Orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, rose 0.5% in September after advancing 3.0% in August.
“One thing is certain and that is this is going to be a gigantic quarter for real GDP growth, although admittedly it is only a rear-view mirror look back at the third quarter, which was before the government shutdown,” said Christopher Rupkey, chief economist at FWDBONDS.
“Whichever side of the fence you are on, Fed officials are unlikely to press hard for a Fed rate cut in December.”
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Nick Zieminski)
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