Jamie Spencer
Weekly jobless claims in the U.S. reached a seven-month low last week, as the effects of labor strikes and severe weather have introduced noise into the data over recent months. According to the Department of Labor, 213,000 initial claims were filed for the week ending Nov. 16, down from 219,000 the previous week and below the 220,000 expected by economists.
Declining Jobless Claims Despite Recent Highs
Jobless claims have been steadily declining after peaking at their highest level in over a year in October. Meanwhile, continuing applications for unemployment benefits increased by 36,000 to 1.9 million, marking the highest level since November 2021.
Jefferies US economist Thomas Simons highlighted the significance of jobless claims data, stating, “The weekly claims report remains the best real-time monitor of labor market conditions. Right now, the data show that the labor market is trending sideways at a healthy level.”
Mixed Labor Market Data
Labor market data remains mixed due to disruptions from labor strikes and hurricanes, which weighed on October’s jobs report. The report showed the U.S. economy adding just 12,000 jobs that month. However, with hurricane-related factors now out of the equation, the labor market “still looks robust,” according to EY chief economist Gregory Daco.
Concerns about labor market weakness earlier this year have eased as recent data has shown improvement. The unemployment rate has fallen from a peak of 4.3% to 4.1%, and layoffs remain low.
Fed’s Approach to Interest Rates
The labor market’s recent strength has influenced the Federal Reserve’s approach to interest rates. While a half-percentage-point rate cut in September reflected concerns over labor market softness, Fed officials have since suggested a slower path for additional cuts. Federal Reserve governor Michelle Bowman expressed caution on Wednesday, stating that progress toward the 2% inflation target has “stalled.”
“I see greater risks to the price stability side of our mandate, especially while the labor market remains near full employment,” Bowman said.
Market Expectations for December Rate Decision
Market participants are closely watching the Federal Reserve’s next moves. As of Thursday morning, the CME FedWatch Tool indicated a 56% chance of another interest rate cut at the Fed’s December meeting.
