Jobless claims unexpectedly drop to 214,000
Economists expected unemployment applications to rise last week
The Fitz-Gerald Group principal Keith Fitz-Gerald and Sarge986 president Stephen Guilfoyle discuss the stock markets volatile reaction to the Fed's rate hike on 'The Claman Countdown.'
The number of Americans filing first-time unemployment benefits unexpectedly dropped to a three-week low last week, a sign the labor market remains extremely tight despite the Federal Reserve's efforts to cool it down.
Figures released Thursday by the Labor Department show applications for the week ended Oct. 15 fell to 214,000 from the downwardly revised 226,000 recorded a week earlier. That is also below the 2019 pre-pandemic average of 218,000 claims.
Continuing claims, or the number of Americans who are consecutively receiving unemployment aid, rose to 1.385 million, up by 21,000 from the previous week's revised level. One year ago, more than 3.27 million Americans were receiving unemployment benefits.
The strong jobs 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.
INFLATION SURGED MORE THAN EXPECTED IN SEPTEMBER AS PRICES REMAIN PAINFULLY HIGH
A man hands his resume to an employer at the 25th annual Central Florida Employment Council Job Fair at the Central Florida Fairgrounds. (Photo by Paul Hennessy/SOPA Images/LightRocket via Getty Images / Getty Images)
"Given the long and variable lag before interest rate hikes are fully absorbed into the economy, policymakers may ultimately do too much, tipping the economy into recession and creating a surge in layoffs," said Jim Baird, the CIO at Plante Morgan Financial Advisors. "For now though, the lack of more tangible progress in softening up tight labor market conditions will only reinforce the Fed’s bias toward aggressive monetary tightening."
Economic projections released by the Fed in September show that most officials expect unemployment to climb to 4.4% by the end of next year, up from the current rate of 3.7%. That is significantly higher than June when policymakers saw the jobless rate inching up to 3.7%.
The Marriner S. Eccles Federal Reserve Board Building is seen on September 19, 2022 in Washington, DC. ((Photo by Kevin Dietsch/Getty Images) / Getty Images)
Chair Jerome Powell conceded during the post-meeting press conference that higher rates could "give rise to increases in unemployment."
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"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."