The number of people making initial jobless claims jumped in the week ending November 11, while those who have lost jobs are finding it tougher to enter employment, a sign that the labor market is cooling.
Initial claims increased by 13,000 to a little over 230,000, a three-month high, with the four-week average also ticking up to about 220,000, data from the U.S. Department of Labor showed on Thursday. Continued claims, which refer to requests for benefits from people who are already without work, rose to the highest level in two years.
The slowing pace in the job market comes at a time when there are signs inflation is cooling. Data this week showed overall inflation rose by 3.2 percent in October, but that was lower than the previous month's jump of 3.7 percent. Core inflation, a measurement that excludes the volatile energy and food costs, ticked down a little to 4 percent.
Fueled by post-COVID consumer spending and throttled supply chains, prices soared to 40-year highs prompting the Federal Reserve to institute the most aggressive increases in interest rates seen since the 1980s to slow down inflation. Part of that story also includes employers hiring at a rapid pace to meet consumer demand for services, which pushed up earnings, boosting spending and lifting prices.
With the labor market cooling and people struggling to find work, there are signs that consumers may be slowing down their spending, which could help inflation tick down.
On Wednesday, data from the Commerce Department revealed that retail spending declined in October on the back of high borrowing costs and a resumption of student loan payments in September after a pause during the pandemic. Meanwhile, the unemployment rate went up slightly in October to 3.9 percent, from the previous month's 3.8 percent figure.
"Continued claims continued their upward march in the week ended November 4, rising to the highest level in nearly a year," Nancy Vanden Houten, a U.S. economist at Oxford Economics, said in a note shared with Newsweek. "The upturn in continued claims suggests that unemployed individuals are finding it more difficult to find new jobs, which would be consistent with a slower pace of hiring."
The decline in hiring and slowing inflation could be seen by policymakers at the Fed as a sign that their hiking of rates is working and that the economy is moving toward its target of 2 percent inflation. But analysts warn that a cut in borrowing costs may not be on the horizon any time soon.
"The claims data are consistent with a job market that is cooling enough to keep rate hikes off the table, but too strong to make rate cuts a consideration any time soon," Vanden Houten said. "The Fed is surely encouraged by recent inflation data but needs to see a further slowdown in the labor market and wage growth to be persuaded that inflation is on a sustainable path back to 2 percent.
"We expect that scenario to evolve only gradually and don't expect the first rate cut until September of next year."
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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Omar Mohammed is a Newsweek reporter based in the Greater Boston area. His focus is reporting on the Economy and ... Read more
