Fewer Americans are Losing Their Jobs

The labor market continues to tighten, as fewer people applied for unemployment benefits than expected last week—suggesting fewer Americans are losing their jobs.

Initial applications for the benefits, used by economists as a barometer for the health of the labor market in the U.S., came in at 212,000 for the week ending February 10, below the expected 219,000 and marking a four-week low.

"Jobless claims continue to surprise to the downside despite an uptick in layoff announcements from major companies," Alex McGrath, Chief Investment Officer for NorthEnd Private Wealth shared with Newsweek via email.

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.

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.

According to the CME FedWatch tool, a barometer for the market's expectation of potential changes to the fed funds target rate, there is a 10.5 percent chance of the Fed lowering its benchmark rate at its March meeting, and a 38.1 percent chance of a rate cut in May.

While the initial jobless claims data is positive, the Labor Department's report also touches on the broader implications of the figures for the labor market, particularly with continuing claims. Despite the weekly number coming below expectations, continued claims ticked up to 1.895 million, higher than the expected 1.88 million, which suggests that while fewer people are being let go, it is taking them longer to find a new job.

And referring to the impact of companies who have announced job cuts, Pantheon Macroeconomics Chief Economist Ian Shepherdson told Newsweek via email: "Looking ahead, the key leading indicators of initial claims, including the Challenger layoff numbers, WARN notices of mass layoffs and plant closures, and Google searches for 'job cuts', all point to a clear increase in the spring, or perhaps sooner," adding that the "lags vary."

According to the Labor Department's monthly employment release issued earlier this month, the total unemployment rate in the U.S. remained at 3.7 percent in January as employers added 353,000 jobs, far ahead of the 185,000 estimate.

Labor force participation, defined as the number of people in the labor force as a percentage of the civilian population, was at 62.5 percent in January, according to the Labor Department, just below last year's high of 62.8 in November, suggesting that while tight, there are still jobs available in the market.