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this US Economy Seems to be slowing down, as Rising unemployment Unemployment claims and applications. The number of people applying for unemployment benefits increased to 243,000 in the week ended July 13 from 223,000 the week before. This is the eighth consecutive week that claims have been above 220,000. The trend indicates a slight but meaningful shift in the market, hinting at possible problems ahead.
Weekly unemployment claims are an important sign of layoffs. Recent data showed a slight increase in unemployment claims. The Fed has raised its benchmark borrowing rate 11 times since March 2022 to control inflation that surged after the 2020 coronavirus recession. By reducing the hot labor market and limiting wage growth, the Fed aims to reduce inflationary pressures.
“The Fed asked for more evidence of a slowing economy, and they’ve largely received it,” said Chris Larkin, managing director of trading and investing at E-Trade. “You can add today’s weekly jobless claims number to the growing list of data points suggesting a rate cut.” Regardless, few analysts believe the Fed will cut rates at its upcoming meeting, although many are speculating that the central bank will cut rates in September.
The number of people receiving unemployment benefits in the United States also rebounded after a brief decline. As of the week of July 6, approximately 1.87 million people were receiving unemployment benefits, an increase of approximately 20,000 from the previous week, the highest level since November 2021, reflecting the difficulty some Americans have in finding jobs.
Jobless claims have been rising recently, which could mean people are out of work longer, a bad sign for the health of the labor market. Several industries, including agricultural manufacturer Deere & Co. and media companies such as CNN, are laying off employees.
In addition, the four-week average of jobless claims, a measure of weekly volatility, increased by 1,000 to 234,750, further highlighting the gradual decline in the health of the labor market.
Despite the increase in unemployment claims, overall labor market conditions remain strong. High consumer demand and a healthy labor market have avoided the recession that many economists had predicted during the Fed’s rate hikes. As inflation continues to ease, the Fed’s soft landing goal (lower inflation while avoiding large layoffs and recession) appears to be achievable.
However, recent government statistics have shown some signs of weakness in the labor market. The unemployment rate rose to 4.1% in June, even though U.S. employers added 206,000 jobs during the same period. The number of jobs increased slightly to 8.1 million in May, but the number of jobs in April was revised down to 7.9 million, the first time it has been below 8 million since February 2021.
This has created a rather complicated situation for policymakers. On the one hand, the increase in unemployment claims and unemployment benefit applications indicates that economic growth is slowing. But on the other hand, the overall health of the labor market remains historically good, and high consumer demand drives economic growth.
The challenge facing the Fed is trying to maintain stability in a difficult economic environment. Although the rise in unemployment claims suggests that the increase in federal interest rates is having the intended effect of slowing the labor market, there is still uncertainty about the long-term impact on the economy. If the market continues to weaken, it may prompt the Fed to reconsider its rate hike strategy.
In summary, the recent rise in weekly jobless claims and unemployment claims signals that the U.S. economy may be entering a cooling period. While the overall labor force situation remains traditionally strong, the gradual increase in unemployment claims and continued unemployment claims indicate challenges for Americans trying to hold on to their jobs. As the Fed continues to monitor trends, its biggest hurdle will be managing low inflation without causing too much harm to the labor market. The success or failure of the Fed’s aggressive rate hikes in the coming months will depend on whether we see the soft landing it expects or if the economy faces more challenges.
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