Stock markets rise with key inflation data

The number of ongoing applications for unemployment benefits rose to its highest level since November 2021 last week, indicating that the labor market is cooling as unemployed workers struggle to find new jobs.

New data from Labour Department Nearly 1.84 million claims were filed in the week ended June 22, up from 1.82 million in the previous week. Meanwhile, the four-week moving average of weekly unemployment claims rose by 3,000 to 236,000, the highest rate since September 2023.

Jeffrey Roach, chief economist at LPL Financial, argued that these figures “provide warning signs that the labor market may be softening.”

The key question for the Federal Reserve is whether this easing is another sign of normalization in the labor market or an indicator that higher interest rates could seriously harm the U.S. economy.

A growing number of economists believe that risks lead to painful consequences.

Nancy Vanden Houten, chief U.S. economist at Oxford Economics, cautioned against reading too far into the claims data as they can be volatile week to week, but said a further increase in the trend in weekly jobless claims would undoubtedly be a concern.

“A sustained increase in initial claims would signal more weakness in the labor market and a larger increase in the unemployment rate than we currently expect, and would lend further support to our case for the Fed to begin lowering rates in September,” Vanden Houten wrote in a note Thursday.

The Fed has largely stuck to its contention that it must gain “greater confidence” in the path of easing inflation before cutting interest rates. In his most recent press conference on June 12, Fed Chairman Jerome Powell said that the labor market is normalizing and, from the Fed’s perspective, has not yet shown real signs of concern.

“We’re seeing a gradual cooling off — a gradual move toward a better equilibrium. We’re watching this carefully to make sure there’s nothing more to it than that, but we don’t see anything like that,” Powell said.

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