Recent U.S. Labor Department data shows a significant rise in jobless claims, indicating that layoffs are stabilizing at a slightly elevated but still manageable level. This trend aligns with the Federal Reserve’s ongoing efforts to cool an overheated labor market and manage inflation.
Increase in Unemployment Claims
For the week ending July 13, jobless claims increased by 20,000 to 243,000, up from the last week’s 223,000. This is the eighth consecutive week with claims exceeding 220,000. Before this period, claims had stayed below this level almost all of 2024, except for three weeks. Weekly unemployment claims are a crucial indicator of layoffs, reflecting the labor market’s stability.
Federal Reserve’s Economic Strategy
Since March 2022, the Federal Reserve has been increasing its benchmark borrowing rate, with 11 hikes aimed at controlling the four-decade high inflation that followed the COVID-19 recession. This strategy seeks to cool the labor market and moderate wage growth, which the Fed believes contributes to inflation. The rise in jobless claims suggests that the Fed’s measures might be gradually cooling the economy.
Chris Larkin, managing director of trading and investing at E-Trade, commented: “The Fed asked to see more evidence of a cooling economy, and for the most part, they’ve gotten it. Add today’s weekly jobless claims to the list of rate-cut-friendly data points.” Despite this, few analysts expect a rate cut at the Fed’s upcoming meeting, although there is increasing consensus that a rate cut might happen in September.
Continuing Unemployment Benefits
The number of Americans receiving unemployment benefits has increased after a brief decline. As of the week of July 6, about 1.87 million Americans were collecting jobless benefits, up by 20,000 from the previous week. This is the highest number since November 2021. The increase in continuing claims indicates more people are struggling to find new jobs after losing their previous ones.
Various sectors have experienced job cuts recently, highlighting the widespread nature of the terminations. Companies such as agricultural manufacturer Deere and media outlets like CNN have announced significant workforce reductions, reflecting broader economic adjustments.
Four-Week Average and Economic Resilience
The four-week average of claims, which helps smooth out weekly volatility, increased by 1,000 to 234,750. Despite these rises, strong consumer demand and a resilient labor market have helped the U.S. economy avoid a recession that many economists predicted amid the Fed’s aggressive rate hikes. As inflation continues to ease, the Fed’s goal of achieving a “soft landing”—reducing inflation without causing a recession and widespread layoffs—seems increasingly attainable.
While the labor market remains historically robust, latest government data indicate some weakening. In June, the unemployment rate slightly increased to 4.1%, even as employers added 206,000 jobs. Job postings in May saw a slight increase to 8.1 million, although April’s figure was revised down to 7.9 million, marking the first time since February 2021 that job postings fell below 8 million.
The recent rise in jobless claims and continuing unemployment benefits suggests the U.S. labor market is undergoing adjustments. These developments are consistent with the Federal Reserve’s efforts to stabilize inflation and moderate economic activity. While the labor market remains strong by historical standards, signs of weakening indicate that achieving a balance between controlling inflation and maintaining employment will require careful monitoring and potential policy adjustments in the coming months.
