(ConservativeFreePress.com) – For the week ending on October 21, the number of Americans filing for unemployment benefits rose, triggering concerns among economic experts that the job market may be entering a period of moderation. Employers might be less eager to add new staff due to increased operational costs and elevated interest rates.
The U.S. Department of Labor reported that initial claims for unemployment assistance increased by 10,000, reaching a total of 210,000. While this figure is slightly higher than the anticipated 205,000, it still portrays a labor market that is comparatively steady. On a monthly average basis, claims nudged upwards to 207,500, marking a rise of 1,250 compared to the revised average of the previous week.
This uptick in claims has led some to speculate that recent moves by the Federal Reserve to raise interest rates may be affecting employers. The elevated cost of borrowing is making business operations more expensive. Earlier in the week, Torsten Sløk, a chief economist at Apollo Global Management, noted that small businesses are now facing a 10% interest rate on short-term loans, according to National Federation of Independent Business data. Consequently, small enterprises are finding it prudent to scale back on investments and hiring.
However, it’s worth noting that the increase in unemployment claims doesn’t necessarily indicate a surge in layoffs. “The job market still shows resilience in terms of job retention,” commented Nancy Vanden Houten, lead U.S. economist at Oxford Economics. She also pointed out that while there have been fewer layoffs, the job-seeking population seems to be facing challenges in securing new employment.
The underlying data suggests that while significant job losses aren’t occurring, people are having to rely on unemployment benefits for more extended periods. This could be indicative of a sluggish pace in new hiring, leading some to believe that the Federal Reserve might need to maintain higher interest rates for a while longer to meet its inflation target of 2%.
Vanden Houten concludes that it’s improbable we’ll see further rate hikes in the near future, especially in the upcoming Federal Reserve meeting. “The labor market would have to soften considerably more for the Fed to be convinced that the path to a 2% inflation rate is sustainable,” she remarked. She further speculates that if the economy continues its robust performance, the first rate cut might be deferred to the latter half of 2024.
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