Jobless claims climb higher to 230,000 as economy cools
Number of Americans applying for unemployment edges higher
Mike Wilson, Morgan Stanley chief U.S. equity strategist and CIO, discusses the impact of the economy on markets and the Fed's handling of inflation.
The number of Americans filing for unemployment benefits ticked higher last week as high inflation and steep interest rates begin to cool the U.S. economy.
Figures released Thursday by the Labor Department show initial claims for the week ended Dec. 3 rose to 230,000 from the upwardly revised 226,000 recorded a week earlier. That is above the 2019 pre-pandemic average of 218,000 claims.
Continuing claims, filed by Americans who are consecutively receiving unemployment benefits, rose to 1.671 million for the week ended Nov. 26, up by 62,000 from the previous week's revised level. It marked the highest level for recurring unemployment applications since February, indicating that workers who lose their jobs are struggling to find new ones.
"A notable increase in jobless claims is evident compared to the cyclical lows last spring," said Jim Baird, CIO of Plante Moran Financial Advisors. "Jobless claims had dipped to a meager 166,000 last March before edging higher in the following months. The sustained increase since early this year is material, even if the more recent uptick has been limited."
JOB CUTS SURGE 127% IN NOVEMBER AS COMPANIES BRACE FOR ECONOMIC DOWNTURN
A number of notable companies including Amazon, Apple, Lyft, Meta Platforms and Twitter have all announced layoffs in recent weeks.
Job seekers visit booths during the Spring Job Fair at the Las Vegas Convention Center on April 15, 2022. (K.M. Cannon/Las Vegas Review-Journal / Getty Images)
For months, the labor market has remained one of the few bright spots in the economy. The November jobs report showed that employers added 263,000 new jobs last month, a solid figure that suggests hiring remains strong.
But it may not last long: The Federal Reserve is raising interest rates at the fastest pace in decades as it tries to crush runaway inflation. Although the labor market is still healthy, both the housing and manufacturing sectors are weakening and inflation remains painfully high.
DEMOCRATS SLAM 'DANGEROUS' FED RATE HIKES, WARNING OF WIDESPREAD JOB LOSSES
Policymakers have already approved six straight rate increases and have signaled that more hikes are to come as they try to cool the economy — and the labor market. The Fed releases minutes of the Nov. 1-2 policy meeting on Wednesday afternoon.
Fed policymakers have made it clear that they anticipate unemployment to climb as a result of higher rates, which could force consumers and businesses to pull back on spending.
Jerome Powell, chairman of the U.S. Federal Reserve, speaks during a news conference following a Federal Open Market Committee meeting in Washington, D.C., on May 4, 2022. (Al Drago/Bloomberg via Getty Images / Getty Images)
Updated projections from the central bank's September meeting show that officials expect unemployment to climb to 4.4% by the end of next year, up from the current rate of 3.7%.
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There are some signs the labor market is starting to soften with a plethora of Big Tech companies slashing thousands of jobs in recent weeks as they brace for a possible recession.
That could mean roughly 1 million Americans lose their jobs between now and the end of 2023. Other analyses — including one from Deutsche Bank — show unemployment climbing as high as 6% as the result of the Fed's interest rate hikes.