- According to U.S. Labor Department data released yesterday, initial unemployment claims soared by 21,000 to 218,000, or about 9% above the median Bloomberg survey of economists’ estimate of 200,000.
- While the overall level of unemployment claims remains relatively low, it is creeping higher and could complicate rate-setting in the latter half of the year.
In a surprising twist to the economy, the effect of waning pandemic-era support for Americans has seen an unexpected rise in applications for U.S. state unemployment insurance claims, led by Kentucky and California.
According to U.S. Labor Department data released yesterday, initial unemployment claims soared by 21,000 to 218,000, or about 9% above the median Bloomberg survey of economists’ estimate of 200,000.
Although the continuing claims figures suggest a rock-solid labor market, a durable increase in initial applications could signal the onset of weakening.
With the U.S. Federal Reserve tightening monetary policy more aggressively to hold back price pressures, higher interest rates are expected to dampen demand for both labor and business expansion and the increase in initial claims could be the first sign of that turn.
While the overall level of unemployment claims remains relatively low, it is creeping higher and could complicate rate-setting in the latter half of the year.
The rise in fresh unemployment claims isn’t likely to derail the Fed’s next two 50-basis-point policy hikes, as policymakers contend with the fastest pace of price increases in over four decades.
Investors looking for weaker job numbers to test the Fed’s resolve for tightening will need to wait for labor conditions to get far worse before the path of interest rate hikes gets derailed.
Last week, U.S. Federal Reserve Chairman Jerome Powell reiterated the central bank’s resolve to do whatever it takes to bring down price pressures, and signaled that more aggressive tightening was not off the table.
