The number of Americans who filed for unemployment benefits last week was the highest since November, indicating that the labor market is cooling as the Federal Reserve tries to lower inflation by slowing economic growth.
Claims for unemployment benefits rose 6,000 to 260,000 for the week ended July 30, the Labor Department said on Thursday, equaling an eight-month high two weeks ago. First-time appeals generally reflect dismissals.
The four-week average for claims, which evened out weekly gains and declines, also rose to about 255,000 from the previous week. Jobless claims have been steadily rising since hitting a 50-year low in early April.
“The direction of applications has changed. From a sustained downtrend to an uptrend, this signals a change in the labor market. Overall, further interest rate increases will lead to a rebalancing of supply and demand for workers and further increases in layoffs in the coming months.” High Frequency Economics- Rubeela Farooqi, the chief economist of the United States, noted.
Earlier this week, the government reported that American employers posted fewer jobs in June. Openings fell from 11.3 million in May to a still-firm 10.7 million in June, meaning there were 1.8 job openings for every unemployed worker. Before 2021, openings did not exceed 8 million per month.
“Although the labor market has cooled slightly, overall demand for workers continues to outpace supply,” Nancy Vanden Houten, chief U.S. economist at Oxford Economics, said in a research note. “Given the imbalance between supply and demand for workers, as the economy slows, employers are more likely to slow down hiring in the first place than lay off workers.”
Slowing job growth
The Labor Department’s July jobs report due Friday is expected to show employers added 250,000 jobs last month, which would be a healthy number in normal times but the lowest since December 2020. Economists expect the unemployment rate to fall. keep at 3.6% for the fifth month.
While the job market is still considered strong, there have been some high-profile layoffs recently announced by companies including Carvana, Coinbase, Netflix, Redfin, and Tesla. A number of other companies, particularly in the tech sector, have announced hiring freezes.
Other indicators point to some weakness in the US economy. The government said last week that the US economysecond straight quarterly contraction.
Consumer prices are still rising, rising 9.1% in June from a year earlier, the biggest annual increase in four decades. In response, the Federal Reserve raised its key lending rate by another three-quarters of a point last week. This follows June’s three-quarter-point increase and another half-point increase in May.
Higher rates have already depressed home sales, made the prospect of buying a new car more difficult and raised credit card interest rates.
All of these factors paint a different and confusing picture of the post-pandemic economy: Inflation is squeezing household budgets, forcing consumers to cut back on spending, and growth is faltering, raising fears of a recession.
Jobless claims hit an 8-month high as layoffs were higher
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