Weekly jobless claims rose more than expected last week, the latest sign of a cooling labor market.
The latest data from the Labor Department showed that 243,000 new jobless claims were filed in the week ended July 13, up from 222,000 the previous week and above the 229,000 that economists had expected. This tied the weekly jobless claims figure for June and was the highest level since August 2023.
Meanwhile, continuing applications for unemployment benefits reached the highest level since November 2021, with nearly 1.87 million claims filed in the week ended July 6, up from 1.85 million the week before.
Thomas Simons, a US economist at Jefferies, speculated that the rise in weekly jobless claims could be due in part to workers losing their jobs due to Hurricane Beryl. Nevertheless, he noted that the trend in jobless claims in recent weeks reflects further cracks in the labour market.
“Data from the past few weeks, while extremely strong, point to increasing weakness in the labor market,” Simons wrote in a research note on Thursday. “It is too early to tell whether this is another step in a process of the labor market returning to more balance or the early stages of a growing downward momentum.”
The signs of weakness Simons cited support the case for the Fed to start cutting rates soon, several economists said.Goldman Sachs chief economist Jan Hatzius wrote in a research note on Monday that the Fed should consider raising rates as soon as July, given recent easing in the labor market and slowing inflation.
The unemployment rate rose for the third consecutive month to 4.1% in June, up from 4% in May.
“The conclusion is clear,” Hatzius wrote. “Layoffs are under control, but the unemployment rate is gradually trending higher as hiring is not strong enough to absorb all of the new domestic and foreign-born labor force entrants. So far, the rise in unemployment has 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 a tipping point where a further softening of labor demand would lead to a larger, and much less welcome, increase in the unemployment rate.”
Read more: How does the labor market affect inflation?
As of Thursday morning, the market was pricing in about a 98% chance that the Fed would cut interest rates by the end of its September meeting, while investors were pricing in just under a 5% chance of a rate cut at its next meeting on July 30-31, according to the CME FedWatch tool.
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A “Now Hiring” sign hangs outside Taylor Party & Equipment Rentals in Somerville, Massachusetts, U.S., September 1, 2022. REUTERS/Brian Snyder (REUTERS/Reuters)
Josh Shaffer is a reporter for Yahoo Finance. Follow him on X Follow.
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