New Unemployment Claims Unexpectedly Rise For First Time In Four Weeks As Inflation, Russia Drive Economic Uncertainty

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Topline

The number of new unemployment claims unexpectedly jumped for the first time in nearly a month on Thursday, highlighting the rising level of economic uncertainty amid a prolonged inflation surge and simmering geopolitical tensions between Russia and Ukraine.

Economists were expecting 218,000 people would file new unemployment claims last week.

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Key Facts

About 248,000 people filed initial jobless claims in the week ending February 12, an increase of 23,000 from the previous week, according to the weekly data released Thursday.

Economists were only expecting about 218,000 new claims last week, according to Bloomberg data.

Stocks fell in pre-market trading immediately after the report, with the Dow Jones Industrial Average trading down by about 294 points, or 0.8%, by 9:45 a.m. ET, while the S&P 500 and tech-heavy Nasdaq, also fell about 0.8%.

Despite the pop in new claims, the number of continued claims in the week ending February fell by about 26,000 to less than 1.6 million.

Crucial Quote

“There’s a bit of fog associated with the latest seasonally adjusted new jobless claims, rising for the first time in four weeks,” Hamrick said, adding that the higher-than-expected “defied expectations” for improvement. “Inflation, the pandemic and geopolitical concerns still have some plot twists yet to be resolved, underscoring the high level of economic uncertainty currently prevailing.”

Key Background

Despite a record wave of Covid-19 cases, the U.S. added back a surprisingly strong 467,000 new jobs in January, but the unemployment rate ticked up to 4%, compared to 3.9% in December. Fed officials will dissect this month’s jobs report before their next policy meeting in mid-March, when they’re “expected to embark on an interest rate hiking cycle” to combat a decades-high surge in inflation, Hamrick says. “While higher interest rates increase borrowing costs for all businesses, they also make firms’ projected profits worth less in investors’ valuation models,” Nigel Green, CEO of $12 billion wealth advisory DeVere Group, said in an email to Forbes last week.

Tangent

Though job openings have skyrocketed to record highs, labor supply remains “substantially depressed,” a team of Goldman economists led by Jan Hatzius wrote in a note to clients this month, pointing out the labor force participation rate of 62.2% remains well below prepandemic levels of 63.4%. Goldman estimates there are roughly 2.5 million “missing” American workers who dropped out of the labor force during the pandemic and still aren’t looking for work, including about 800,000 people who retired early (thanks largely to rising home and equity prices) and are therefore unlikely to ever return to the labor force.