By Lucia Mutikani

WASHINGTON (Reuters] – While the number of Americans filing for new jobless benefits claims unexpectedly increased last week, they remained well below their pre-pandemic level as labor market conditions tighten.

Economists still expect solid gains for February, despite Thursday’s first month-over-month report by the Labor Department.

The acute shortage in workers has led to employers offering additional incentives and raising wages to keep their employees happy as well as attracting new ones. The rise in claims can be attributed to the volatility of data from week to week and the harsh weather that some areas experience.

Daniel Silver, an economist with JPMorgan (NYSE) in New York said: “Given both the frequent noise in data and the wide range of factors can impact filings, we don’t believe that the recent surge in initial claims filings are particularly worrying at the moment.” Overall, however, we believe the labor market continues to be tight.

For the week ending Feb. 12, initial claims for unemployment benefits rose 23,000 to 248,000, seasonally adjusted. Reuters polled economists to forecast 219,000 new applications in the most recent week.

The unadjusted claim rose from 7,742 – 238,482 last Wednesday, thanks to big gains in Missouri, Ohio, and Kentucky. These increases were offset by notable falls in Pennsylvania, New Jersey, and Wisconsin.

Since mid-January, when claims reached a 3-month peak, Claims have been falling since then. This was due to a spike in coronavirus infections, which were fueled by Omicron variant. Recent weeks have seen a significant drop in infections.

End of December saw a record 10.9million job openings. In April 2020, claims fell to 6.149 millions from an all time high.

This week’s data covers the period in which government survey business establishments during February’s Employment Report’s Nonfarm Payrolls section. The claims are far below the 290,000.0 level of mid-January. In January, 467,000 new jobs were created by the economy.

Wall Street stocks fell amid rising tensions between Russia and the West over Ukraine. Dollar rose against other currencies. U.S. Treasury yields declined.

MAXIMUM EMPLOYMENT

According to a survey by the Philadelphia Federal Reserve, employment in mid-Atlantic factories increased strongly in February. Manufacturers also extended work hours. The persistent shortages caused a moderate increase in factory activity across the eastern Pennsylvania region, which includes southern New Jersey, Delaware and New Jersey.

The tight labor market, coupled with snarled supply chain problems, has resulted in strong wage gains and are driving up inflation.

The Federal Reserve published the minutes of its Jan. 25-26 meeting. They stated that “many” U.S. officials “reported labor market conditions as being at, or very close to, those compatible with maximum employment.”

In order to reduce inflation, the Fed could raise interest rates starting in March. Economists anticipate seven increases this year.

According to the claims report, 26,000 people received benefits in February after receiving aid for the first week. The number was 1.593 million by the end of Feb.

Conrad DeQuadros (senior economic advisor, Brean Capital in New York) stated that “there are no signs” of an increase in the labor market.

The January freeze caused a decline in homebuilding. According to the Commerce Department, housing starts decreased 4.1% to a seasonal adjusted annual rate last month of 1.638 Million units.

According to National Centers for Environmental Information, temperatures were lower than average in the Northeast and Midwest during January.

Housing starts for single families, who account for most of the homebuilding activity, fell by 5.6%, to 1.116 million. The West saw a rise in starts, while those in the Northeast, Midwest, and South experienced a decline. The decline in starts last month is likely temporary. Building permits increased 0.7% to an average rate of 1.899million units. This was the highest level since May 2006. A single-family permit surged 6.8%, to a rate 1.205million units. This is a new one-year record.

There are record numbers of homes for sale that have been previously owned. However, builders face challenges due to the soaring costs of inputs.

According to government data, prices for softwood lumber (used for framing) increased by 25.4% in January.

On Wednesday, the National Association of Homebuilders stated that production bottlenecks in building materials were causing delays to projects. It noted that many builders have been waiting for months to get cabinets, garage doors and countertops, as well as appliances.

This supply shortage was accentuated by an increase in backlog houses that were approved and not started, a record for the month.

The rising mortgage rate could slow down housing demand, particularly for first-time buyers. According to the Mortgage Bankers Association, the 30-year fixed rate mortgage rate rose above 4% for the first week since 2019.

Isfar Muir, an economist at Isfar Munir said that “Rising mortgage interest rates pose a substantial risk to housing market demand.” Citigroup New York (NYSE:).

The Fed can sell new homes prior to they’re started. If last-bid bid attempts are made to buy houses before rates go up further, it could increase home sales. This will be positive for housing starts at the least for a few more months.