By Lucia Mutikani
WASHINGTON (Reuters) - The number of Americans filing new applications for unemployment benefits rose slightly last week, pointing to steadily easing labor market conditions heading into the final stretch of 2024.
Sluggish hiring, however, means some people who lose their jobs are collecting unemployment checks for longer periods relative to early this year, potentially keeping the jobless rate above 4.0%. Economists said this should allow the Federal Reserve to cut interest rates again this month despite stalled progress in lowering inflation to the U.S. central bank's 2% target.
"Claims remain low by long-run standards, but still high enough to perpetuate the rising trend in the unemployment rate, given very modest hiring," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
Initial claims for state unemployment benefits rose 9,000 to a seasonally adjusted 224,000 for the week ended Nov. 30, the Labor Department said on Thursday. Economists polled by Reuters had forecast 215,000 claims for the latest week.
The data included the Thanksgiving holiday, which could have injected some noise into the report. Claims are entering a period of volatility, which could make it difficult to get a clear picture of the labor market.
Unadjusted claims dropped 34,967 to 210,166 last week amid a plunge of 9,777 in filings in California and a tumble of 6,383 in Texas. There were also sizeable declines in Florida and North Carolina as the effects of Hurricanes Helene and Milton faded.
Other states reporting notable decreases included Georgia, New York, Wisconsin and Illinois.
Claims remain at levels consistent with continued job growth, and have signaled a sharp rebound in nonfarm payrolls in November after the labor market was severely distorted by Helene and Milton as well as strikes by factory workers at Boeing (NYSE:BA) and another aerospace company.
Nonfarm payrolls likely increased by 200,000 jobs in November after rising by 12,000 in October, the lowest number since December 2020, a Reuters survey showed. The unemployment rate is forecast to rise to 4.2% from 4.1% in October.
The historically low layoffs account for most of the labor market's strength. Hefty interest rate hikes from the Fed in 2022 and 2023 to tame inflation have left companies with little appetite to hire more workers.
The Fed's "Beige Book" report on Wednesday described employment as "flat or up only slightly" across the central bank's districts in November. It also noted "hiring activity was subdued as worker turnover remained low and few firms reported increasing their headcount," adding that "the level of layoffs was also reportedly low."
The number of people receiving benefits after an initial week of aid, a proxy for hiring, fell 25,000 to a seasonally adjusted 1.871 million during the week ending Nov. 23, the claims report showed.
Unadjusted so-called continuing claims increased by 5,927 in Washington state, likely because of the lingering effects of the Boeing strike. They also rose considerably in Minnesota, but fell sharply in California, Florida and Georgia.
Stocks on Wall Street were mixed. The dollar fell against a basket of currencies. Yields on shorter-dated U.S. Treasury notes rose.
IMPORTS DECLINE
"Perhaps workers laid off at related suppliers aren't being rehired in anticipation of the coming layoffs at Boeing," said Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
The Fed launched its easing cycle in September, having hiked its policy rate by 525 basis points in 2022 and 2023. It is widely expected to deliver another rate cut later this month.
The interest rate outlook for 2025 is uncertain amid threats of tariffs and tax-cut promises from President-elect Donald Trump. Economists have said these actions would raise prices and increase government borrowing.
A separate report from the Commerce Department's Bureau of Economic Analysis showed the trade deficit contracted 11.9% to $73.8 billion in October as imports declined by the most since late 2022, potentially positioning trade to contribute to economic growth this quarter.
Economists had forecast the trade deficit would ease to $75.0 billion. Imports dropped 4.0%, the biggest decrease since November 2022, to $339.6 billion. Goods imports tumbled 5.5% to $269.3 billion.
Businesses concerned about Trump's threats to raise tariffs could try to front-load imports, which would reverse October's drop. Trump has said he would impose a 25% tariff on all products from Mexico and Canada and an additional 10% tariff on goods from China on his first day in office.
Worries about a potential dock workers strike in January could also see businesses scrambling to get more imports in.
Imports of capital goods decreased $7.5 billion in October, weighed down by declines in imports of computers and semiconductors. Imports of industrial supplies and materials, which include petroleum, fell $3.3 billion. Petroleum imports at $17.2 billion were the lowest since June 2021.
There were also decreases in imports of consumer goods, mostly pharmaceutical preparations. Imports of automotive vehicles, parts and engines also fell.
Imports of services rose $1.4 billion to a record high $70.2 billion, boosted by travel, charges for the use of intellectual property, transport, insurance and other business services.
Exports fell 1.6% to $265.7 billion. Goods exports dropped 3.0% to $170.7 billion, led by a $3.9 billion decrease in capital goods exports.
Shipments of automotive vehicles, parts and engines also fell, as did those of industrial supplies and materials, and consumer goods. Exports of services increased $1.0 billion to an all-time high of $95.1 billion. They were lifted by travel, other business services, maintenance and repair, transport and charges for the use of intellectual property. Exports of telecommunications, computer and information services also rose.
The goods trade deficit narrowed 9.5% to $98.7 billion. It decreased 7.3% to $92.4 billion when adjusted for inflation, prompting the Atlanta Fed to raise its GDP estimate for the fourth quarter to a 3.3% annualized rate from a 3.3% pace.
The economy grew at a 2.8% annualized rate in the July-September quarter. Trade has been a drag on economic growth for three straight quarters.
"We could be in for an extended period of wildly fluctuating trade data well into 2025," said Stephen Stanley, chief U.S. economist at Santander (BME:SAN) U.S. Capital Markets.