Jobless claims hit highest level since August

EleonJuly 18, 2024

5 2 minutes read

Jobless claims hit highest level since August

Weekly jobless claims rose more than expected last week, the latest sign of a slowing labor market.

New data from the Labor Department showed that 243,000 initial jobless claims were filed in the week ending July 13, up from 222,000 the previous week and more than the 229,000 economists had expected. That figure matches the weekly number of jobless claims in June, the highest level of weekly filings since August 2023.

At the same time, the number of open unemployment claims reached its highest level since November 2021, with nearly 1.87 million claims filed in the week ending July 6, up from 1.85 the previous week.

Thomas Simons, an economist at Jefferies US, believes that some of the increase in weekly jobless claims could be due to workers being displaced by Hurricane Beryl. However, Simons notes that the trend in jobless claims in recent weeks reflects new cracks in the labor market.

“Data over the past few weeks have signaled gradual weakness in the labor market, albeit from a position of extreme strength,” Simons wrote in a research note published Thursday. “It is too early to tell whether this is another step in the labor market rebalancing process or the early stages of downward momentum.”

The signs of weakness that Simons pointed to have reinforced the Fed’s stance on a possible interest rate cut, according to several economists. On Monday, Goldman Sachs chief economist Jan Hatzius wrote in a research note that with inflation slowing, the Fed should consider cutting rates as early as July, given the recent slack in the labor market.

In June, the unemployment rate increased for the third consecutive month, reaching 4.1%, compared to 4% in May.

“The bottom line is clear,” Hatzius wrote. “While layoffs remain low, the unemployment rate is gradually trending higher because hiring is not strong enough to absorb all the new entrants to the labor market, whether they are U.S.-born or foreign-born. The rise in the unemployment rate has so far been welcomed by Fed officials, but we agree with Chairman Powell’s assessment that the labor market is now fully balanced.”

“We may be approaching an inflection point where a further slowdown in labor demand will translate into a larger and much less welcome increase in unemployment.”

Learn more: How does the labor market affect inflation?

As of Thursday morning, markets were pricing in a 98% chance that the Fed will cut rates by the end of its September meeting. At the same time, investors were pricing in a nearly 5% chance that it will cut at its next meeting, on July 30-31, according to the CME’s FedWatch tool.