The number of continuing applications for unemployment benefits reached its highest level since November 2021 last week, reinforcing signs of a slowing labor market as unemployed workers struggle to find new jobs.
New data from Ministry of Labor It showed that nearly 1.84 million claims were filed in the week ended June 22, up from 1.82 million the previous week. Meanwhile, the four-week moving average of weekly jobless claims rose 3,000 to 236,000, the highest level since September 2023.
The data “sends a warning signal that the labor market may be declining,” said Jeffrey Roach, chief economist at LPL Financial.
The key question for the Fed is whether this easing is another sign of labor market normalization or an indicator that higher interest rates could seriously harm the US economy.
A growing number of economists believe that the risks are skewed towards a painful outcome.
Nancy Vanden Houten, chief economist at Oxford Economics, cautioned against reading too much into claims data, which can be volatile from week to week, but noted that any move higher in the direction of weekly unemployment claims would undoubtedly be a point of concern.
“A sustained rise in initial claims would point to more labor market weakness and a larger rise in the unemployment rate than we currently expect and would add further support to our argument for the Fed to begin cutting rates in September,” Vanden Houten wrote in a note on Thursday.
The Fed has largely stood firm on its argument that it must gain “greater confidence” in inflation’s downward path before cutting interest rates. In his last press conference on June 12, Fed Chairman Jerome Powell noted that the labor market is continuing to return to normal, and in the Fed’s view, it has not shown real signs of concern yet.
“We’re seeing a gradual calming down — a gradual movement toward a better balance. We’re watching it carefully for signs… of something more, but we’re not really seeing that,” Powell said.
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