Recurring applications for unemployment benefits have surged for the sixth consecutive week, suggesting that individuals facing job loss are encountering increased difficulty in securing new employment. According to the latest data released by the Labor Department on Thursday, recurring jobless claims, a key indicator of individuals receiving unemployment benefits, climbed to 1.82 million in the week ending Oct. 21, marking the highest level since April.
In addition, initial claims also experienced an uptick, reaching 217,000 in the week concluding on Oct. 28. The four-week moving average, which helps to smooth out the weekly data fluctuations, registered a slight increase.
These figures underscore the significant impact even a mild deceleration in hiring can have on the workforce. Despite companies still adding jobs at a commendable pace and maintaining a low unemployment rate, the momentum in hiring appears to be tapering off, leaving some job-seekers in search of opportunities for extended periods.
Rubeela Farooqi, Chief US Economist at High Frequency Economics, commented, “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.”
A comprehensive assessment of the labor market’s trajectory will be provided in the monthly government jobs report scheduled for release on Friday. Economists anticipate the addition of approximately 180,000 positions in October, a figure that would still surpass the pre-pandemic trend in job growth.
On an unadjusted basis, initial claims inched up to 196,767. Notably, claims experienced the most significant increase in Michigan, California, and North Carolina, while registering a decline in New York.
The strike initiated by the United Auto Workers union against the three largest automakers in the US may have contributed to the observed uptick. Although striking workers typically do not qualify for unemployment benefits in most states, companies placed workers on furlough in plants nationwide. The union has subsequently reached agreements with each company.
Bloomberg Economics Offers Insight:
“The modest rise in initial jobless claims, together with the persistent increase in continuing claims, suggests the labor market is softer than it seems on the surface. In past prints, household survey data showed the number of people becoming unemployed is growing faster than the number transitioning out of unemployment — usually a leading indicator of a jump in the unemployment rate.”
— Eliza Winger, Economist
Federal Reserve officials have recently elevated interest rates to a 22-year high in a bid to curb inflation, and the soaring borrowing costs, which are already exerting a dampening effect across various sectors of the economy, are anticipated to eventually impact hiring plans more broadly.
Following the central bank’s decision to maintain rates on Wednesday, Chair Jerome Powell acknowledged a cooling trend in the job market. He reiterated that if evidence suggests otherwise, it “could put further progress on inflation at risk and could warrant further tightening of monetary policy.”
In a separate report on Thursday, US labor productivity demonstrated the most substantial increase in three years, offering some relief from the inflationary effects of recent wage growth.
Source: Bloomberg
