By Lucia Mutikani
WASHINGTON, Oct 1 (Reuters) – New applications for US unemployment benefits drifted close to 57-year lows last week and layoffs decreased in September, suggesting labor market stability persisted even as employers remained cautious about boosting hiring.
The report from the Labor Department on Thursday joined a raft of other data, including robust consumer spending in August, in painting a rosy picture of the economy despite rising headwinds from the US-Israeli war with Iran, which has driven diesel prices to record highs. Economists said robust corporate profits growth and resilient domestic demand were shielding workers from layoffs, for now.
“At some point, elevated energy costs and material prices will force firms to lay off marginal workers to protect profit margins, but there is no sign of that here,” said Carl Weinberg, chief economist at High Frequency Economics.
Initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 197,000 for the week ended September 26, the Labor Department said on Thursday. Economists polled by Reuters had forecast 200,000 claims for the latest week.
Claims have held below the 200,000 level for three straight weeks and are near levels last seen in 1969. Some economists said historically low layoffs, if sustained, could raise questions about the labor market overheating, with monetary policy implications.
“We do not appear to be close to that result yet, but this is a new risk that the FOMC appears to be watching,” said Stephen Stanley, chief US economist at Santander US Capital Markets, referring to the Fed’s policy-setting committee.
A separate report from global outplacement firm Challenger, Gray & Christmas showed layoffs announced by US-based employers dropped 18% to 43,281 in September. They were down 20% from a year ago and fell 43% in the third quarter. Employers are, however, in no rush to increase headcount.
Hiring plans increased by 90,787 last month. While that was sharply up from 12,325 in August, hiring intentions were down 23% from a year ago, and the tally was the lowest for any September since 2011. Challenger, Gray & Christmas said a surge in seasonal hiring typically seen starting in September was absent, adding that “companies are in a wait-and-see period.”
The Federal Reserve last month raised its overnight benchmark interest rate by 25 basis points to the 3.75%-4.00% range, the first hike in three years, and flagged further increases in borrowing costs in the months ahead. The odds of another rate hike this month were diminished by cooler-than-expected inflation readings in August and July.
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