The number of Americans collecting jobless benefits last week is at its highest level since November, a sign the labor market is cooling as the Federal Reserve tries to tame inflation by slowing economic growth.
Applications for jobless aid rose by 6,000 to 260,000 for the week ending July 30, matching an eight-month high set two weeks earlier, the Labor Department said. informed of Thursday. First time applications generally reflect layoffs.
The four-week average for claims, which equalizes weekly fluctuations, also increased from the previous week to about 255,000. Unemployment claims have been rising steadily since hitting a 50-year low in early April.
“The direction of filing has changed. From a continued decline into an uptrend, a turnaround in the labor market is indicated. Overall, further interest rate hikes will rebalance labor supply and demand, and a further increase in layoffs in the coming months.” Rubila Farooqui, chief US economist in high frequency economics, said in the note.
Earlier this week, the government reported that US employers posted fewer job opportunities in June. Openings fell from 11.3 million in May to a steady 10.7 million in June, meaning there are 1.8 open jobs for every unemployed worker. Prior to L2021, openings never exceeded 8 million a month.
“While there is a slight cooling in the labor market, aggregate demand for workers exceeds supply,” said Nancy Vanden Houghton, chief US economist at Oxford Economics, in a research note. “Given the imbalance between the supply and demand of workers, we think employers are more likely to slow down hiring first rather than lay off workers as the economy slows.”
slow job growth
The Labor Department’s jobs report for July, out Friday, is expected to show that employers took on another 250,000 jobs in the past month, which would be a healthy number in normal times, but the lowest since December 2020. Economists expect the unemployment rate to hold at 3.6 per cent for the fifth consecutive month.
While the labor market is still considered strong, there have been some high-profile layoffs recently announced by companies including Carvana, Coinbase, Netflix, Redfin and Tesla. Several other companies, especially 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 economy shrank 0.9% in the second quarterSecond straight trimester contractions.
Consumer prices are still rising, up 9.1% in June from a year earlier, the biggest annual increase in four decades. In response, the Federal Reserve raised its prime lending rate by three-quarters of a single point last week. This follows three-quarters of June’s growth and another half-point increase in May.
Higher rates have already sent home sales down, making the prospect of buying a new car more cumbersome and driving up credit card rates.
All of those factors paint a different and confusing picture of a post-pandemic economy: inflation is sagging household budgets, forcing consumers to pull back on spending, and growth is weakening, There are growing fears that the economy could plunge into recession.