U. S. home sales declining as the labor market
2023.01.19 13:14
U. S. home sales declining as the labor market
By Ray Johnson
Budrigannews.com – Unexpectedly, the number of Americans filing new claims for unemployment benefits fell last week, indicating solid job growth and continued labor market tightness despite Federal Reserve efforts to reduce worker demand.
The Labor Department’s weekly report on jobless claims on Thursday probably doesn’t change expectations that the U.S. central bank will reduce the size of its interest rate increases even further next month. However, it shattered the hopes of the financial market that the Fed would halt its fastest rate hike cycle since the 1980s, which had been fueled by a decline in inflation and a decline in retail sales in December.
Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York, stated, “A low level of layoffs indicates that demand for workers remains strong and labor market conditions remain tight.” Businesses appear reluctant to reduce headcounts in the face of worker shortages and difficulty hiring.”
For the week ending January 14, initial claims for state unemployment benefits decreased by 15,000 to a seasonally adjusted 190,000, the lowest level since September. Reuters polled economists and predicted 214,000 claims for the most recent week.
At the beginning of the year, it was likely difficult to adjust the data to account for seasonal variations, which was one reason why claims dropped for the third week in a row.
Despite the acceleration of layoffs in the technology sector and interest rate-sensitive industries like finance and housing, claims have remained at levels consistent with a tight labor market despite the seasonal volatility.
Last week, unadjusted claims decreased by 53,582 to 285,575 Estimated claims for California increased significantly. This was countered by significant decreases in Texas, Georgia, Michigan, New Jersey, Wisconsin, and New York.
Microsoft Corporation announced on Wednesday that it would join Amazon.com (NASDAQ:) in cutting 10,000 jobs. which is moving forward with a plan to fire 18,000 workers. Economists argued that these businesses were right-sizing after overhiring during the COVID-19 pandemic, so they should not be interpreted as indicating a decline in the labor market.
John Blevins, a guest lecturer at Cornell University’s SC Johnson College of Business, stated, “The tech sector is just getting back to where they were in 2020 or 2021, which I don’t think is a bad situation.” There is still a large workforce. Nearly immediately, these departing employees at these major tech companies will find new employment.
Economists say that after having trouble finding workers during the pandemic, businesses outside of the technology sector are generally reluctant to send employees home. They anticipate that before resorting to layoffs, businesses will reduce their hiring.
Indeed, “many firms hesitated to lay off employees even as demand for their goods and services slowed and planned to reduce headcount through attrition if necessary,” according to the Fed’s most recent “Beige Book” report on Wednesday.
On Thursday, U.S. stock markets opened lower. When compared to a basket of currencies, the dollar was slightly weaker. The prices of US Treasurys dropped.
The Fed raised its policy rate by 425 basis points last year, moving it from close to zero to the current range of 4.25 percent to 4.50 percent—the highest since late 2007. It predicted that borrowing costs would rise by at least 75 basis points by the end of 2023, as it did in December.
The government surveyed businesses for the nonfarm payrolls portion of the employment report for January, and the claims data that were released on Thursday covered that time period.
Between the survey weeks in December and January, claims decreased. In January, the economy added 223,000 jobs.
More information regarding employment growth in January will be provided by data next week on the number of people receiving benefits following an initial week of aid, a proxy for hiring. According to the claims report, the so-called continuing claims increased by 17,000 to 1.647 million in the week ending January 7.
The housing market continues to be stifled by tighter monetary policy. Single-family home construction rebounded in December, according to a separate Commerce Department report released on Thursday. However, permits for future construction fell to levels more than two and a half years lower, indicating future weakness.
The majority of new homes are built from single-family housing starts, which increased 11.3% last month to a seasonally adjusted annual rate of 909,000 units, the highest level since August. The rate of starts for housing projects with five or more units fell by 18.9% to 463,000 units.
The monthly rate of housing starts decreased by 1.4% to 1.382 million units. In 2022, housing starts decreased by 3%.
Permits for single-family homes fell by 6.5 percent to 730,000 units, the lowest level since April 2020. These permits were the lowest they had been since February 2016, excluding the pandemic plunge. The rate of 555,000 units granted building permits for housing projects with five or more units increased by 7.1%.
The total number of building permits decreased by 1.6% to 1.330 million units. In 2022, permits decreased by 5.0%.
Abbey Omodunbi, a senior economist at PNC Financial (NYSE:), stated, “The housing market recession will likely continue through the majority of 2023.” in Pennsylvania, Pittsburgh.
