Applications for U.S. unemployment benefits eased last week and a measure of labor costs remained firm in the closing months of 2022, highlighting a tight job market that’s contributing to inflationary pressures.
Initial unemployment claims decreased by 2,000 to 190,000 in the week ended Feb. 25, according to Labor Department data out Thursday. Separate figures showed unit labor costs climbed an annualized 3.2% in the fourth quarter, nearly three times the preliminary estimate.
The figures underscore the enduring strength of the labor market. While a number of high-profile firms, predominantly in technology and finance, have announced job cuts in recent months, layoffs across the economy remain historically low.
That said, economists and investors are watching the claims data closely for any sign the labor market is starting to crack under the weight of still-rapid inflation, high labor costs and interest-rate hikes by the Federal Reserve.
The Bureau of Labor Statistics’ revised estimates for the fourth quarter showed output per hour increased by roughly half as much as initially reported. Strong productivity growth helps offset the inflationary impact of rising wages.
The report incorporated revised source data that resulted in a substantial increase in hours worked, which hampered productivity growth. For all of last year, productivity fell 1.7%, the most since 1974. Labor costs in 2022 increased 6.5%, the largest gain in four decades.
Continuing claims, or the number of people who have already filed an initial application and are now claiming unemployment benefits, eased to 1.66 million in the week ended Feb. 18.
The claims figures can be volatile week-to-week but tend to be even more so around holidays, and the latest period included Presidents’ Day. The four-week moving average in initial claims, which smooths out some of that volatility, edged up to 193,000.
On an unadjusted basis, initial claims fell to 201,710 last week, reflecting declines in Kentucky and California.
Data out next week, including January job openings and the February employment report, will offer additional insight into the state of the U.S. labor market.
