Jobless claims rise more than expected as labor market starts to cool

Applications for unemployment benefits edged higher as Fed raises rates higher

The number of Americans filing first-time unemployment benefits rose more than expected last week, a sign the labor market is starting to cool as the Federal Reserve raises interest rates at the fastest pace in decades.

Figures released Thursday by the Labor Department show applications for the week ended Oct. 1 climbed to 219,000 from the downwardly revised 190,000 recorded a week earlier. That is in line with the 2019 pre-pandemic average of 218,000 claims. 

It marks the highest level for jobless claims in five weeks and is well above the median forecast for 203,000 new applications. 

If unemployment benefits continue to climb, it could be a sign that employers are laying off workers as consumers pull back on spending and the economy grinds to a halt. Other data published this week shows that job openings plummeted to the lowest level since early in the pandemic.

THE FED'S WAR ON INFLATION COULD COST 1M JOBS

Continuing claims, or the number of Americans who are consecutively receiving unemployment aid, continued to inch higher, edging up to 1.36 million for the week ended Sept. 24. One year ago, nearly 4.17 million Americans were receiving unemployment benefits.

The weaker-than-expected data comes as the Federal Reserve tries to crush runaway inflation with the most aggressive rate hikes in decades. Policymakers have already approved five straight rate increases and have signaled that more hikes are to come as they try to cool the economy, and the labor market.

Updated projections released in September show that Fed officials expect unemployment to climb to 4.4% by the end of next year, up from the current rate of 3.7%.

SEVERE RECESSION NEEDED TO COOL INFLATION, BANK OF AMERICA ANALYSTS SAY

That is significantly higher than in June when policymakers saw the jobless rate inching up to 3.7%. Chair Jerome Powell conceded during the post-meeting press conference that higher rates could "give rise to increases in unemployment."

"We think we need to have softer labor market conditions," Powell said. "And if we want to set ourselves up really light the way to another period of a very strong labor market, we have got to get inflation behind us. I wish there were a painless way to do that. There isn't."

CLICK HERE TO READ MORE ON FOX BUSINESS

The data precedes the release of the September jobs report on Friday morning, which is expected to show that employers hired 250,000 workers following a gain of 315,000 in July. The unemployment rate is expected to hold steady at 3.7%.

Load more..