The number of Americans applying for the first time unemployment benefit rose more-than-expected last week, a sign the job market is slowing as the US Federal Reserve hiked interest rates at its fastest pace in decades.
Figures released by the Labor Department on Thursday show that claims for the week ended October 1 rose to 219,000, compared with a downwardly revised 190,000 recorded a week earlier. That’s the average of 218,000 pre-pandemic applications in 2019.
It marks the highest level for jobless claims in five weeks and is well above the median forecast of 203,000 new claims.
If unemployment benefits continue to rise, it could be a sign that employers are laying off workers while consumers are cutting back on spending and the economy grinds to a halt. Other data released this week shows job vacancies have fallen to their lowest since the pandemic began.
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Consecutive claims, or the number of Americans receiving consecutive unemployment benefits, continued to rise, rising to 1.36 million in the week ended September 24. A year ago, nearly 4.17 million Americans were receiving unemployment benefits.
The weaker-than-expected data comes as the Federal Reserve seeks to rein in runaway inflation with its most aggressive rate hikes in decades. Policymakers have already approved five straight rate hikes, signaling more rate hikes to come to cool the economy and jobs.
Updated forecasts released in September show that Fed officials expect the unemployment rate to rise to 4.4% by the end of next year from the current rate of 3.7%.
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That’s significantly higher than in June, when policymakers saw the unemployment rate rise to 3.7%. Chairman Jerome Powell conceded during the press conference after the meeting that higher rates “could lead to a rise in unemployment”.
“We think we need to have softer labor market conditions,” Powell said. “And if we really want to ease our way into another phase of a very strong labor market, we have to get inflation behind us. I wish there was a painless way to do this. There is no.”
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The data comes ahead of the release of the September jobs report on Friday morning, which is expected to show employers hired 250,000 workers, after adding 315,000 in July. The unemployment rate is expected to remain stable at 3.7%.