Weekly jobless claims plummeted to their lowest levels since the start of the coronavirus pandemic – 310,000 for the week ending Sept. 4 – according to the latest data from the Labor Department. The stark drop of 35,000 jobless claims from the previous week brought the four-week moving average to 339,500.
This comes even as cases of the COVID-19 Delta variant rise, signifying that it has yet to cause serious layoffs or other economic challenges.
According to the Federal Reserve, the labor market has been the final battleground for raising interest rates. With inflation rising and the economy showing signs of improvement, the Federal Reserve said it wanted to see gains in the job market in order to raise the federal funds rate.
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Expiration of unemployment benefits
The new drop in jobless claims took place around the same time that federal COVID-related unemployment benefits expired. Almost eight million Americans lost benefits or received a reduced weekly check after the Sept. 6 deadline passed.
Twenty-four states had ended their benefits programs before the deadline, too, citing a rising number of job openings that were previously unavailable. In fact, the national unemployment rate fell to 5.2% in August according to the Bureau of Labor Statistics.
As labor market conditions improve and the unemployment rate drops, the Federal Reserve will move closer to raising interest rates. Some estimates say the next rate hike could come in 2022, but plans for tapering could cause market interest rates to begin rising this year.
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Federal Reserve to begin making moves this year
Federal Reserve Chairman Jerome Powell confirmed in August that the Fed’s plan is to begin tapering its Pandemic Unemployment Assistance this year. He said that while inflation is running high and there had been economic progress, the rise in COVID-19 cases created an unknown in the path to recovery.
As the job market growth shows signs of improvement, the Federal Reserve could come closer to ending its stimulus and raising rates. The Fed will be watching the labor market closely over the next few weeks leading up to its September meeting, where some analysts predict there will be an announcement of initial moves to begin tapering its economic stimulus. But any gains in the coming weeks will also be working against August’s jobs report, which showed a slowdown in job gains.
It’s unclear exactly what month the Fed will begin making moves, but many economist and even Fed members believe it should be this year. When it does, interest rates will once again begin to increase. If you want to take advantage of today’s record-low rates, consider taking out a personal loan to consolidate high-interest debt. Visit Credible to get prequalified in minutes without affecting your credit score and see how much you could save.
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