Jobless claims fall to 7-month low, show labor market 'trending sideways at a healthy level'

Thu, Nov 21, 2024, 6:36 AM 2 min read

The number of jobless claims in the US has fallen to a seven-month low, with 213,000 initial claims filed in the week ending Nov. 16, down from 219,000 the week prior and below economists' expectations. This suggests that the labor market is 'trending sideways at a healthy level' despite recent mixed data due to labor strikes and severe weather. The unemployment rate has also fallen from 4.3% to 4.1%, leading some Fed officials to express caution about cutting interest rates further, with markets currently pricing in a 56% chance of a rate cut at the next meeting in December.

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Weekly jobless claims rose less than expected last week, reaching a seven-month low, as the impact of labor strikes and severe weather has made weekly data noisy over the last few months.

New data from the Department of Labor showed 213,000 initial jobless claims were filed in the week ending Nov. 16, down from 219,000 the week prior and below the 220,000 economists had expected.

The weekly unemployment claims have been falling steadily throughout the past several weeks after hitting their highest level in more than a year in October.

Meanwhile, the number of continuing applications for unemployment benefits hit 1.9 million, up 36,000 from the week prior and the highest level since November 2021.

"The weekly claims report remains the best real-time monitor of labor market conditions," Jefferies US economist Thomas Simons wrote in a note to clients on Thursday. "Right now, the data show that the labor market is trending sideways at a healthy level."

Recent labor market data has been a mixed bag due to labor strikes and hurricanes, both of which weighed on October's Jobs report, which showed the US economy added just 12,000 jobs in the month.

With hurricanes no longer factored in to the weekly tally of claims, the data shows a labor market with low layoffs that "still looks robust," EY chief economist Gregory Daco wrote on X on Thursday.

Weakness in the labor market had been a concern through the summer and into the fall as jobless claims picked up along with a rise in the unemployment rate and a decline in monthly job gains. This data contributed to the Fed's calculus when cutting interest rates by half a percentage point in September.

But since then, labor market data has come in better than expected with the unemployment rate falling from a peak of 4.3% to 4.1%, and Fed officials have talked about a slower path for interest rate cuts.

On Wednesday, Federal Reserve governor Michelle Bowman expressed concern that the Fed’s progress toward 2% inflation has “stalled” and the central bank should proceed "cautiously" when lowering interest rates.

"I see greater risks to the price stability side of our mandate, especially while the labor market remains near full employment," Bowman said.

As of Thursday morning, markets were pricing in a roughly 56% chance the Federal Reserve cuts interest rates at its next meeting in December, per the CME FedWatch Tool.