The number of new applications for unemployment benefits unexpectedly dropped by 1,000 to 191,000 last week, the Labor Department reported Thursday.
Falling jobless claims are a sign the labor market is remaining resilient despite the Federal Reserve’s historic effort to tighten monetary policy to slow economywide spending and drive down inflation.
The weekly jobless claims number has been closely watched over the past year, given the Federal Reserve has been hiking aggressively. The new numbers come a day after the Fed announced it would increase its interest rate target by a quarter of a percentage point.
The move by the Fed was a tough one due to the volatility in the financial sector following Silicon Valley Bank’s failure nearly two weeks ago. But the rate hike sends a sign that the Fed continues to see inflation as a bigger threat than the economic repercussions of the uncertainty about the banking system.
Still, on Wednesday, following the decision, Fed Chairman Jerome Powell noted that the labor market has proved resilient despite the barrage of rate hikes over the past year. That means there is a bit of a cushion for the Fed’s historic tightening.
The economy added 311,000 jobs in February, more than expected, and the unemployment rate ticked up a bit to 3.6%, which is a very low figure by historical standards. The unemployment rate had previously dropped to a shocking 3.4%, the lowest since 1969.
Still, despite the strong labor market, there are fears that the rate hikes, now coupled with the banking crisis, could knock the economy into a recession sometime in the next year.
Goldman Sachs recently raised the chances of a recession in the United States to 35%, up 10 points from its previous prediction. The firm said the forecast reflects “increased near-term uncertainty around the economic effects of small bank stress.”