President Joe Biden just got another positive employment report.
Coming off the heels of a January jobs report that shattered expectations, initial applications for unemployment benefits fell to 218,000 for the week ending February 3, below the expected forecast of 221,000. This week's numbers saw a decline of 6,000 applications from the week prior, which is a signal of a labor market continuing to show resilience as the weekly jobless claims figures came below economists' expectations.
The enduring labor market strength unfolds as the Federal Reserve continues its efforts to moderate the economy's pace and cool down the job sector through its interest rate hike campaign.
According to Pantheon Macroeconomics Chief Economist Ian Shepherdson, while Thursday's numbers came below the forecast, the labor market's current status offers a mixed signal for the future.
"Claims are still very low, but trouble ahead?" Shepherdson questions, pointing to a potential rise in claims and a slowdown in payroll growth in the coming months.
"The weekly numbers are volatile, but the four-week moving average now stands at 213K, a six-week high," Shepherdson told Newsweek via email. "Whether this is anything more than a reversal of the drop in claims in December, perhaps due to seasonal adjustment problems around the holidays, is unclear at this point."
Still, there have been sweeping layoffs this year, particularly in the tech sector.
"The media are full of layoff stories but one-time layoffs at big companies don't trigger sustained increases in the trend in claims," Shepherdson said. "Less-publicized job losses at small firms, below the radar of the national media, ultimately matter more."
Echoing a cautiously optimistic view, Larry Tentarelli, founder of Blue Chip Daily Trend Report, interprets the recent figures as a positive sign for the Federal Reserve's strategy.
"We believe that today's number keeps the Fed on track for a first rate cut in the May-June 2024 window," Tentarelli told Newsweek.
"Based on today's mostly inline number, the jobs market continues to hold up very well. A strong jobs market and strong consumer continue to bode well for the economy and should push back on immediate recession concerns."
The Labor Department's report also touches on the broader implications of the figures for the labor market, particularly with continuing claims. Despite the visibility of layoffs in the tech sector, the overall labor market remains tight as continuing jobless claims came in at 1.871 million, below the 1.875 million estimate.
With employers hesitant to reduce their workforce in the wake of the Fed's policy rate hikes totaling 5.25 percentage points since March 2022, the labor market's durability is particularly noteworthy.
U.S. central bank officials have indicated a cautious approach toward lowering borrowing costs, aiming to ensure inflation is on a steady path back to the Fed's 2 percent target before making adjustments in the coming months.
"We maintain our May/June 2024 first rate cut expectation," Tentarelli said.
Update 2/8/24, 9:59 p.m. ET: This story was updated with additional information.
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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Aj Fabino is a Newsweek reporter based in Chicago. His focus is reporting on Economy & Finance. Aj joined Newsweek ... Read more
