The labor market in the United States received some positive news as the number of Americans applying for unemployment benefits reached a four-month low last week. According to the Labor Department, jobless claims decreased by 12,000, totaling 219,000 for the week ending on September 14. This figure came in lower than economists’ expectations, who had predicted 230,000 new filings.
Since May, weekly filings for unemployment benefits had been showing a moderate increase. However, this week’s decline has signaled a potential change. Although the numbers are still at historically healthy levels, the recent rise in jobless claims suggested that high interest rates may have been impacting the labor market.
The Federal Reserve, in response to weakening employment data and declining consumer prices, made a significant move on Wednesday by cutting its benchmark interest rate by half a percentage point. This decision marks the central bank’s shift from taming inflation to supporting job growth. The Federal Reserve aims to achieve a “soft landing,” where inflation is controlled without causing a recession. Stephen Innes of SPI Asset Management noted, “The focus has now decisively shifted to the labor market, and there’s a sense that the Fed is trying to strike a better balance between jobs and inflation.”
This rate cut by the Federal Reserve is the first in four years, following a series of rate hikes in 2022 and 2023 that pushed the federal funds rate to a two-decade high of 5.3 percent. Inflation has been steadily receding, approaching the Federal Reserve’s 2 percent target. Chair Jerome Powell recently declared that inflation was largely under control.
During the first four months of 2024, the average number of weekly jobless benefit applications was just 213,000. However, in May, these numbers started to rise, reaching 250,000 in late July. This increase further supports the notion that high interest rates were starting to cool down the previously red-hot U.S. job market.
In August, U.S. employers added a modest 142,000 jobs, an improvement from the meager 89,000 added in July. However, this figure is still below the monthly average of nearly 218,000 jobs added from January to June. The labor market has been showing signs of a slowdown, with the revised job numbers reported by the Labor Department last month. It was revealed that the U.S. economy added 818,000 fewer jobs from April 2023 through March this year than initially reported.
The latest Labor Department report also highlighted that the four-week average of claims, which smooths out weekly volatility, decreased by 3,500 to 227,500. Additionally, the total number of Americans collecting jobless benefits dropped by 14,000 to approximately 1.83 million. This marks the lowest number since early June.
Overall, the recent decline in jobless claims and the Federal Reserve’s rate cut indicate a shift in focus towards supporting the labor market. The efforts to strike a better balance between job growth and inflation are crucial for achieving a stable economy. As the labor market continues to evolve, it will be interesting to see how these measures impact employment rates and the overall economic landscape.
