Slightly more Americans filed for unemployment benefits last week as the labor market continues to show strength even as the Federal Reserve has tried for nearly a year to slow the economy by raising its main lending rate.
Applications for jobless claims for the week ending Dec. 17 inched up by 2,000 to 216,000 from the previous week’s 214,000, the Labor Department reported Thursday. Jobless claims are generally viewed as a representation of layoffs.
The four-week moving average of claims, which smooths out some of the week-to-week swings, fell by 6,250 to 221,750.
About 1.67 million people were receiving jobless aid the week that ended Dec. 10, about 6,000 fewer than the week before.
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Despite the Fed's attempt to fight stubbornly high inflation by raising interest rates to cool the economy, American workers are still experiencing extraordinary job security, with nearly two jobs for every unemployed person. U.S. employers added 263,000 jobs last month.
Though the U.S. economy shrank in the first half of this year — part of which came before the Fed started hiking rates — the government said Thursday that the economy grew at an unexpectedly strong 3.2% annual pace in the third quarter.
The Fed has raised its key lending rate seven times this year and has projected more in 2023 as it tries to bring down prices that are gobbling up Americans’ paychecks.
Last week, the Fed raised its short-term lending rate by 0.5 percentage points, a smaller increase than the previous four increases of 0.75 percentage points. Its key rate now stands in a range of 4.25% to 4.5%, the highest in 15 years.
Fed policymakers forecast that their key short-term rate will reach a range of 5% to 5.25% by the end of 2023, suggesting the Fed is prepared to raise its rate by another three-quarters of a point and leave it there through next year.
Fed officials have said that to put a significant dent in four-decade high inflation, the unemployment rate needs to be at least 4%. Currently, the unemployment rate stands at 3.7%, just above a half-century low.
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In its updated forecasts, the Fed’s policymakers predicted slower growth and higher unemployment for next year and 2024. The unemployment rate is projected to jump to 4.6% by the end of 2023. That would mark a significant increase in joblessness and typically would reflect a recession, which many economists have predicted.
So far, the housing sector has taken the biggest hit, with mortgage rates more than doubling from a year ago and pushing many would-be buyers to the sidelines. Sales of previously occupied homes have fallen for 10 straight months. Online realtors Redfin and Compass have cut staff multiple times this year.
The technology sector has also gone into belt-tightening mode, with Facebook parent company Meta, Twitter, Amazon and DoorDash all announcing significant layoffs in recent months.
Additional reporting by The Associated Press.
