The number of Americans filing new applications for jobless benefits rose unexpectedly last week, with more individuals continuing to collect unemployment checks at the end of November compared to the start of the year, as the demand for labour cools.
Initial claims for state unemployment benefits increased by 17,000 to a seasonally adjusted 242,000 for the week ended December 7, according to the Labor Department’s report on Thursday. Economists polled by Reuters had forecast 220,000 claims for the latest week.
The jump in claims likely reflects volatility following the Thanksgiving holiday and does not necessarily indicate an abrupt shift in labour market conditions. Claims are expected to remain volatile in the coming weeks, making it challenging to get a clear read on the labour market, which is gradually slowing down.
Despite the volatility, job growth accelerated in November after being significantly affected by strikes and hurricanes in October. However, the unemployment rate ticked up to 4.2% from 4.1%, where it had held steady for two consecutive months.
The cooling labour market increases the likelihood that the Federal Reserve will cut interest rates next week for the third time since it began its policy easing cycle in September. This is despite limited progress in reducing inflation to its 2% target in recent months. The central bank’s benchmark overnight interest rate is currently in the 4.50%-4.75% range, following a series of hikes totalling 5.25 percentage points from March 2022 to July 2023 to combat inflation.
Maintaining a stable labour market is crucial for sustaining economic expansion. Historically low layoffs have contributed to labor market stability and driven consumer spending. The number of people receiving benefits after an initial week of aid, which serves as a proxy for hiring, rose by 15,000 to a seasonally adjusted 1.886 million during the week ending November 30, according to the claims report.
The elevated level of continued claims indicates that some laid-off individuals are experiencing longer periods of unemployment. The median duration of unemployment spells reached the highest level in nearly three years in November, the report indicated. – Reuters
