US weekly jobless claims fall; service sector activity slows further

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  • Weekly jobless claims fall from 18,000 to 215,000
  • Layoffs drop 20% in February; massive hiring
  • Service sector activity slows in February

WASHINGTON, March 3 (Reuters) – The number of Americans filing new claims for unemployment benefits fell to its lowest level this year last week, while layoffs fell sharply in February, indicating that the recovery of the labor market accelerated.

But the upbeat labor market outlook was overshadowed by a survey on Thursday showing service sector activity slowed for a third consecutive month in February, with a measure of employment in the sector contracting for the first time. since June 2021.

According to the Institute for Supply Management (ISM), service companies reported that they “had significant problems hiring full-time and contract labor” and that “vacancies are not being filled. and the candidates are looking for more money”. Factory employment growth also slowed last month, posing a downside risk to job creation in February.

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There were nearly 10.9 million record job openings at the end of December. Economists expect the government’s closely-watched jobs report on Friday to show another month of solid job growth, with the wave of Omicron variant COVID-19 infections abating significantly.

“Workers leaving for higher-paying jobs and more flexible terms is annoying to employers, but turnover is job-neutral on the net as long as workers find jobs that meet their needs,” Will said. Compernolle, Senior Economist at FHN Financial. At New York. “The contraction is not encouraging, but the lingering effects of Omicron could have spread in February.”

Initial claims for state unemployment benefits fell from a seasonally adjusted 18,000 to 215,000 for the week ended Feb. 26, the lowest level since Jan. 1 and the second consecutive weekly decline, the Department of Labor said. Work. Economists polled by Reuters had forecast 225,000 applications.

Unadjusted claims fell by 21,285 to 194,693 last week, led by sharp declines in California and Michigan, which offset an increase in filings in Massachusetts and Rhode Island.

Claims could soon fall back below 200,000, a level they were last below in early December. Claims fell from a record low of 6.149 million at the start of April 2020. The number of people receiving benefits after a first week of aid rose slightly from 2,000 to 1.476 million in the week ended 19 February.

Tight labor market conditions are fueling wage growth, adding to inflationary pressures.

Federal Reserve Chairman Jerome Powell told lawmakers on Wednesday that “the labor market is extremely tight.”

Powell said he would support a 25 basis point interest rate hike at the U.S. central bank’s March 15-16 policy meeting and would be “ready to act more aggressively” if the inflation is not falling as quickly as expected. Read more

Stocks on Wall Street were mostly higher. The dollar appreciated against a basket of currencies. US Treasury yields fell.

DROP IN DISMISSALS

The ISM said Thursday that its non-manufacturing activity index fell to 56.5 in February, the lowest in a year, from 59.9 in January.

The index’s third consecutive monthly decline came despite the substantial decline in coronavirus cases from mid-January. A value above 50 indicates growth in the service sector, which accounts for more than two-thirds of US economic activity.

Most of the investigation was likely conducted before Russia began its war on Ukraine last week, which sent prices for oil, wheat and other commodities soaring.

ISM said supply chain disruptions, capacity constraints, inflation, logistical challenges and labor shortages were affecting the ability of service companies “to meet demand, resulting in slower business activity and economic growth.”

Inflation and supply constraints could worsen due to the Russian-Ukrainian conflict.

“Although Europe will bear the economic brunt of the Russia-Ukraine crisis, unfavorable geopolitics on the continent threatens to exacerbate supply issues and pricing pressures for the U.S. service sector,” Bernard Yaros said. , an economist at Moody’s Analytics in West Chester. , Pennsylvania.

“There will be disruptions in the transport and logistics sectors, many flights have been canceled or diverted, which will lead to increased pressure on cargo capacity.”

The survey’s service industry employment indicator fell to a year-and-a-half low of 48.5 from 52.3 in January. It was the index’s first contraction since June 2021. Some companies in the professional, scientific and technical services sector said the “big quit is real.” Read more

Wells Fargo economists lowered their February payroll forecast to 375,000 from 450,000 earlier.

Nonfarm payrolls likely rose by 400,000 jobs in February after rising by 467,000 in January, according to a Reuters survey of economists. The unemployment rate is expected to fall to 3.9% from 4.0% in January.

Hopes for a strong jobs report were bolstered by a third report from global outplacement firm Challenger, Gray & Christmas showing US-based employers announced 15,245 job cuts in February, down 20% from January.

The companies also announced plans to hire 215,127 workers last month, the largest February total since Challenger began tracking monthly hiring numbers in 2002. That’s up from the 77,630 jobs announced in January.

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Reporting by Lucia Mutikani Editing by Chizu Nomiyama

Our standards: The Thomson Reuters Trust Principles.

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