Continuing claims for unemployment benefits last week reached the highest level since November 2021, underscoring signs that the labor market is cooling as unemployed people struggle to find new work.
New data from the Department of Labor showed nearly 1.84 million claims were filed in the week ended June 22, up from 1.82 million the week before. Meanwhile, the four-week moving average of weekly unemployment claims rose 3,000 to 236,000, the most since September 2023.
Jeffrey Roach, chief economist at LPL Financial, said the data “is a warning sign that the labor market may be weakening.”
The key question for the Federal Reserve is whether this easing is a sign of labor market normalization or an indication that higher interest rates could seriously harm the US economy.
A growing number of economists believe that the risks are trending toward a painful outcome.
Nancy Vanden Houten, chief U.S. economist at Oxford Economics, cautioned against putting too much weight on the claims data, which can fluctuate from week to week. However, she noted that a further increase in weekly unemployment claims would undoubtedly raise concerns.
“A continued rise in initial claims would signal more weakness in the labor market and a larger increase in the unemployment rate than we currently expect. This would further bolster our case for the Fed to begin cutting rates in September,” Vanden Houten wrote in a note on Thursday.
The Fed has largely remained steadfast in its argument that it needs to gain “more confidence” in the lower inflation path before cutting rates. At his most recent press conference on June 12, Fed Chairman Jerome Powell noted that the labor market continues to normalize and, from the Fed’s perspective, shows no real signs of concern.
“We’re seeing a gradual cooling — a gradual movement toward a better equilibrium. We’re watching it closely for signs of … anything more than that, but we’re really not seeing that,” Powell said.
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