Jobless Claims Hit Highest Level Since August 2023
New data from the Department of Labor showed 243,000 initial jobless claims were filed in the week ending July 13, up from 222,000 the week prior and above the 229,000 economists had expected. This tied with a weekly jobless claims reading from June for the highest level of weekly filings since August 2023. Meanwhile, the number of continuing applications for unemployment benefits hit its highest level since November 2021, with nearly 1.87 million claims filed in the week ending July 6, up from 1.85 million the week prior. In June, the unemployment rate rose for the third consecutive month to 4.1%, up from 4% in May. "The bottom line is clear. While layoffs remain subdued, the unemployment rate is gradually trending higher because hiring is not strong enough to absorb new labor force entrants. The updrift in the unemployment rate has been welcomed by Fed officials so far, but we agree with Chair Powell’s assessment that the labor market is now fully back in balance. We may be approaching an inflection point at which further softening in labor demand results in a bigger and much less welcome increase in unemployment." Markets were pricing in a roughly 98% chance the Fed will cut interest rates by the end of its September meeting. Meanwhile, investors were putting the chances it cuts during its next meeting on July 30-31 at less than 5%. Fed Chair Jay Powell indicated that recent data has added "somewhat" to the central bank's confidence that inflation is falling to its target. "We are going to make these decisions meeting by meeting and the evolving data and the balance of risks." Whether July is a possibility or not, investors now feel confident that the path forward for interest rates is lower.
