US Jobless Claims Hit 5-Month Low Complicating Inflation Fight

WASHINGTON (Sputnik) - US unemployment claims hit a five-month low last week, the Labor Department said on Thursday, highlighting the Federal Reserve’s challenge in subduing inflation amid increasing job security in the United States.

Jobless claims for the week that ended on September 24 totaled 193,000, a decrease of 16,000 from the previous week’s downward-revised total and below the average forecast of 215,000 from economists polled by US media.

The figure was the lowest since the week to April 23 and is the first time since early May that claims fell beneath the 200,000 mark.

"The recent decline in layoffs flies in the face of the Fed’s efforts to soften up labor market conditions and knock inflation back down toward its 2% target," Jim Baird, chief investment officer at Plante Moran Financial Advisors said in comments carried by CNBC. "The capital markets have heard the Fed and investors are feeling the pain. But the jobs market? For now at least, it’s not listening."

US inflation, as measured by the broad Consumer Price Index (CPI) has been at four-decade highs of above 8% per annum for about a year now - more than four times the Fed’s 2% target.

The Fed’s own preferred inflation tracker, the Personal Consumption Expenditures Price (PCE) index, has also been higher than expected. The PCE index grew by 7.3% year-over-year in the second quarter - above the 7.1% reading in the prior two quarterly estimates and just off the 7.5% gain in the first quarter.

To fight inflation, the Fed has raised interest rates by 300 points this year, from an original base of just 25 points in February. The central bank’s Chairman Jerome Powell said last week that US interest rate hikes will have some way to go before the Fed considers a pause or reduction, with the likelihood of another 125 basis points being added before the end of the year.

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But the Fed’s interest rate hikes have not had as much impact as intended on the Americans’ ability to pay higher prices thanks to job security in a labor market where two positions existed for every unemployed person.

The jobs market has been the juggernaut of the US economy over the past two years, powering its recovery from the coronavirus pandemic measures.

Unemployment among Americans reached a record high rate of 14.8% in April 2020, with the loss of some 20 million jobs after the COVID-19 breakout. Since then, hundreds of thousands of jobs have been added every month, with the trend keeping up in August. September’s jobs numbers are due on October 7.