The number of continuous applications for unemployment benefits last week reached its highest level since November 2021, as the labor market cools as unemployed workers struggle to find new jobs.
New data from Department of Labor Nearly 1.84 million claims were filed in the week ended June 22, up from 1.82 million in the previous week. Meanwhile, the 4-week moving average of weekly jobless claims rose 3,000 to 236,000, the highest rate since September 2023.
LPL Financial Chief Economist Geoffrey Roche argued that the data “sends a warning signal that the labor market may be softening”.
A key question for the Federal Reserve Bank is whether this softness is another sign of normalization in the labor market or an indicator that higher interest rates will do serious harm to the US economy.
A large number of economists believe that the risks are tilted towards the painful end.
Oxford Economics lead US economist Nancy Vanden Houten cautioned against reading too far into the claims data, which can be volatile from week to week, but noted that further increases in the weekly jobless claims trend would undoubtedly be worrisome.
“A continued increase in initial claims would indicate further weakness in the labor market and a larger rise in the unemployment rate than we currently expect, adding further support to our case for the Fed to begin cutting rates in September,” Vanden Houten wrote. A note on Thursday.
The central bank has largely stuck to its argument that it needs to gain “more confidence” in the path of inflation before cutting interest rates. In his most recent press conference on June 12, Fed Chair Jerome Powell noted that the labor market continues to stabilize and, in the Fed’s view, is not yet showing any real signs of concern.
“We’re seeing a gradual cooling — we’re seeing a gradual move toward a better balance. We’re watching that carefully. There’s more to it, but we’re not really seeing it,” Powell said.
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