As the job market in the United States faces headwinds, the latest data from the Labor Department paints a concerning picture, with recurring applications for unemployment benefits on the rise for a sixth straight week. These alarming figures indicate that individuals who have lost their jobs are experiencing increasing difficulty in securing new employment opportunities.
According to the recently released Labor Department data, recurring jobless claims, often used as a proxy for the number of people currently receiving unemployment benefits, surged to 1.82 million in the week that ended on October 21. This is the highest level reported since April, underscoring the growing challenges faced by the American workforce.
Furthermore, initial claims for unemployment benefits also witnessed an uptick, reaching 217,000 in the week that concluded on October 28. The four-week moving average, which serves to smooth out some of the volatility in the weekly data, inched upwards as well, raising concerns about the resilience of the labor market.
These figures highlight the repercussions of even a minor slowdown in hiring on the labor force. While it’s true that many companies are still actively adding jobs at a reasonably robust pace, and the unemployment rate remains relatively low, the momentum in hiring appears to be dwindling. Consequently, some job-seekers are facing extended periods of joblessness.
Rubeela Farooqi, Chief US Economist at High Frequency Economics, weighed in on the situation, saying, “Overall, levels remain low, and businesses have yet to start shedding workers at a rapid pace given economic activity and demand remain strong. However, the continuing claims numbers bear watching for signs of a softening in labor demand.”
The nation eagerly awaits the release of the monthly government jobs report, scheduled for Friday, which is expected to offer a more comprehensive overview of the labor market’s trajectory. Economists anticipate that the US will have added approximately 180,000 positions in October, a figure that still surpasses the pre-pandemic trend in job growth.
On an unadjusted basis, initial claims edged up to 196,767. The states that reported the largest increases in claims were Michigan, California, and North Carolina, while New York saw a decline in claims.
The United Auto Workers union strike against the three largest automakers in the US may have played a role in the increase in claims. Although striking workers generally do not qualify for unemployment benefits in most states, the companies furloughed workers in plants nationwide. Subsequently, the union has managed to reach agreements with each of the companies involved.
The impact of the Federal Reserve’s decision to raise interest rates to a 22-year high in order to combat inflation is expected to have broader implications for hiring plans. The rising borrowing costs, which are already affecting various sectors of the economy, may create further challenges for job seekers.
Federal Reserve Chair Jerome Powell acknowledged some cooling in the job market while announcing the decision to leave interest rates unchanged on Wednesday. However, he emphasized that if evidence suggests this trend is no longer in place, further tightening of monetary policy may be warranted to safeguard progress against inflation.
In a separate report released on Thursday, US labor productivity showed the most significant improvement in three years, providing some relief from the inflationary pressures driven by recent wage growth. These developments underscore the intricate web of factors influencing the nation’s labor market and economic landscape.
Source: Bloomberg
