The number of Americans filing for unemployment benefits rose to its highest level in a year last week. Experts point to Hurricane Helene and a strike by Boeing workers as the primary causes. However, there are broader problems in the job market.
The US Labor Department reported a rise of 33,000 jobless claims. This brought the total to 258,000 for the week ending October 3rd. This is the highest number since August 2023, surpassing the 229,000 claims predicted by analysts. States heavily impacted by the hurricane, including Florida, North Carolina, South Carolina, and Tennessee, saw the largest increases.
Nancy Vanden Houten, a lead economist at Oxford Economics, stated that claims will likely remain high in these states, as well as those affected by the Boeing strike. She added that the Federal Reserve is expected to treat these effects as temporary, with potential interest rate adjustments in November.
Volatile jobless claims reflect layoffs
Jobless benefit applications are often seen as a key indicator of layoffs in the US. However, they can be unpredictable and subject to changes. The four-week average of claims, which helps smooth out fluctuations, rose by 6,750, reaching 231,000.
The number of Americans receiving unemployment benefits increased by 42,000 to approximately 1.86 million in the week ending September 28th, the highest level since late July. While these numbers suggest some weakness, other factors like high interest rates may also be at play.
Impact of high interest rates on the job market
In addition to weather-related disruptions and labor strikes, there are signs high interest rates could be slowing the job market. Earlier this year, jobless claims averaged 213,000 a week for the first four months. However, numbers began to climbing in May, reaching 250,000 by late July.
In August, the Labor Department revised its job creation figures, showing that 818,000 fewer jobs were added between April 2023 and March 2024 than previously reported. This adjustment is seen as further evidence that the labor market has been gradually slowing.
Federal Reserve cuts rates
To counter the weakening job data, the Federal Reserve cut its interest rate by half a percentage point last month. This shift in focus, from fighting inflation to supporting the job market, is part of the Fed’s attempt to achieve a “soft landing,” lowering inflation without causing a recession.
This was the first rate cut in four years, following a series of rate hikes in 2022 and 2023 that pushed interest rates to a two-decade high.
Inflation, which had been a significant concern, is now approaching the Fed’s target of two percent. This is leading Chair Jerome Powell to declare that inflation is largely under control.