Key facts
- New claims for US unemployment benefits fell to 197,000 last week, near 57-year lows.
- The unemployment rate remained steady at 4.1% in September.
- Low layoffs are contributing to labor market stability.
- Companies are hesitant to ramp up hiring due to economic uncertainty and worker shortages.
- Financial markets are pricing in a roughly 64.2% chance of another Fed rate increase next month.
New claims for US unemployment benefits fell to 197,000 last week, nearing 57-year lows and signaling a strengthening labor market. The Labor Department's report indicated that the labor market is regaining momentum after a summer slowdown, and appears to be weathering economic headwinds, including rising energy prices due to the Middle East conflict.
Economists attribute the decline in claims partly to difficulties in seasonally adjusting data around holidays like Labor Day and residual seasonality. The underlying trend of low layoffs suggests companies are hesitant to let go of staff, remembering labor shortages post-pandemic, though they are also cautious about increasing hiring due to economic uncertainty and worker shortages.
The stability in the labor market supports financial market expectations that the Federal Reserve may raise interest rates again before the year-end to combat inflation. The Fed recently increased its benchmark rate by 25 basis points to the 3.75%-4.00% range. Financial markets are pricing in approximately a 64.2% chance of another rate hike next month.
The number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, increased slightly to 1.719 million during the week ended September 12. However, continuing claims have fallen between the August and September survey weeks for the unemployment rate, which is forecast to remain unchanged at 4.1% in September.