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Jobless claims hit highest level since August
Weekly jobless claims rose more than expected last week in the latest sign of a cooling job market.
New data from Department of Labor showed that 243,000 initial jobless claims were filed in the week ending July 13, up from 222,000 the previous week and above the 229,000 that economists had expected. That tied a weekly jobless claims reading from June for the highest level of weekly filings since August 2023.
Meanwhile, the number of ongoing unemployment benefit claims has reached its highest level since November 2021with nearly 1.87 million claims filed in the week ending July 6, up from 1.85 million the previous week.
Jefferies economist Thomas Simons argued that some of the increase in weekly claims may have been caused by Hurricane Beryl displacing workers. Still, Simons noted that the trend in recent weeks for jobless claims reflected more cracks emerging in the labor market.
“Data over the past few weeks have signaled incremental labor market weakness, albeit from a position of extreme strength,” Simons wrote in a research note Thursday. “It is still too early to tell whether this is another step in the process of the labor market coming into better balance, or whether it is the early stages of building momentum to the downside.”
The signs of weakness that Simons highlighted supported the case The Federal Reserve is likely to start cutting interest rates soon, several economists say. On Monday, Goldman Sachs chief economist Jan Hatzius wrote in a research note that with inflation slowing, the Fed is likely to consider changing interest rates as early as July, given the recent easing in the labor market.
In June, the unemployment rate increased for the third consecutive month, to 4.1%, up from 4% in May.
“The bottom line is clear,” Hatzius wrote. “While layoffs remain contained, the unemployment rate is gradually trending higher because hiring is not strong enough to absorb all the new entrants to the labor force, both native and foreign-born. The rise in the unemployment rate has been welcomed by Fed officials so far, but we agree with Chair Powell’s assessment that the labor market is now fully back in balance.
“We may be approaching a tipping point where a further reduction in demand for labour results in a larger and much less welcome increase in unemployment.”
Read more: How does the labor market affect inflation?
As of Thursday morning, markets were pricing in a roughly 98% chance that the Fed will cut interest rates by the end of its September meeting. Meanwhile, investors were putting the odds that it will cut during its next meeting on July 30-31 at just under 5%, according to the CME FedWatch tool.
The story continues
A “hiring immediately” sign is displayed outside Taylor Party and Equipment Rentals in Somerville, Massachusetts, U.S., September 1, 2022. REUTERS/Brian Snyder (REUTERS/Reuters)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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