The number of Americans filing new claims for jobless benefits rose more than expected last week, the latest sign of a cooling labor market.
The latest data released by the U.S. Department of Labor showed that the number of initial unemployment claims in the week ending July 13 was 243,000, higher than the 222,000 in the previous week and higher than the 229,000 expected by economists. This data is the same as the weekly initial unemployment claims since June and the highest level since August 2023.
Meanwhile, continuing claims reached their highest level since November 2021, with nearly 1.87 million people applying for unemployment benefits in the week ending July 6, up from 1.85 million the previous week.
Thomas Simons, U.S. economist at Jefferies, said some of the rise in claims last week could be due to workers displaced by the hurricanes. Weekly jobless claims are volatile this time of year, including for holidays like Independence Day and when schools are closed for summer break.
But Simons noted that trends in recent weeks may reflect more cracks emerging in the labor market.
“Data over the past few weeks have consistently pointed to a weakening labor market, albeit one that remains strong,” Simons wrote in a research note Thursday. “It is too early to tell whether this is another step toward a better balance in the labor market or the early stages of a downward trend.”
Several economists believe the signs of weakness Simons mentioned provide a reason for the Fed to cut interest rates sooner rather than later. Goldman Sachs chief economist David Hatzius wrote in a research note on Monday that the Fed should consider cutting interest rates as early as July, given that inflation is slowing and the labor market has recently loosened.
In June, the U.S. unemployment rate rose to 4.1%, up from 4% in May. Hatzius wrote:
“While layoffs remain limited, the unemployment rate is gradually rising as hiring is insufficient to absorb all new entrants to the domestic and foreign labor force. The rise in unemployment has been welcomed by Fed officials for now. We agree with Fed Chairman Powell’s assessment that the labor market is now fully back in balance. We may now be approaching an inflection point where a further decline in labor demand would lead to a larger and more unwelcome rise in unemployment.”
As of Thursday, the market was pricing in about a 98% chance of a rate cut by the end of the Fed’s September meeting. Meanwhile, investors were pricing in less than a 5% chance of a rate cut at the Fed’s next meeting on July 30-31, according to CME Group’s FedWatch tool.
Article forwarded from: Jinshi Data
