Rising Unemployment Claims Spark Speculation of Fed Rate Cut in December
1min read The recent labor market data has further fueled expectations that the Federal Reserve may cut interest rates at its December meeting. This comes amidst an unexpected rise in ongoing unemployment claims, which have reached a three-year high, suggesting long-term unemployment is becoming more prevalent among American workers.
For the week ending November 23, new claims for unemployment benefits fell by 2,000 to 213,000, surpassing economists' forecasts of approximately 216,000. This marks a significant rebound from early October's heightened figures that were affected by external factors such as storms and company strikes. Despite this, the sustained increase in ongoing claims indicates a tougher environment for job seekers compared to high inflation periods in previous years.
Many analysts believe that while the number of employed individuals is expected to continue rising, the unemployment rate might not decline and could even see a slight increase as persistent ongoing claims suggest a challenging job market for those recently unemployed. As of mid-November, continuing claims surged by over 9,000 to approximately 1.907 million, adjusted seasonally.
Interestingly, widespread layoffs have not been prevalent, and the unemployment rate remains relatively low, bolstering steady economic expansion in the U.S. This resilient job market supports strong consumer spending, a crucial component accounting for a substantial share of the U.S. GDP.
However, the biggest concern now lies in the fact that those who need new jobs may face prolonged job searches. Some companies, particularly small to medium-sized ones, might be delaying hiring until there's more clarity on the trajectory of interest rates and consumer spending.
The continuing climb in ongoing unemployment claims raises apprehensions about the difficulty many workers face in securing new employment. As the unemployment rate has remained at 4.1% for two consecutive months, this data will be critical for the Federal Reserve's December meeting decisions. Initially, the probability of a quarter-point rate cut in December has surged to nearly 70%, reinforcing the notion of a gradual, cautious approach to future rate reductions.
