Continuing unemployment benefit claims have risen to the highest level since February, a sign that the Federal Reserve’s historic tightening cycle is beginning to buffet the economy.
Continuing claims rose by 62,000 to 1.7 million in the week ending Nov. 26, the Labor Department reported Thursday. The numbers show that people who are losing their jobs or quitting are beginning to have trouble finding new work, an indication that the tight labor market is fading into the past.
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This week’s jobless claims number is being closely watched as it is the last such report before the Fed votes on raising rates next week.
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Rising jobless claims, a proxy for layoffs, are a sign the unusually strong labor market might be starting to react to the central bank’s efforts to tighten monetary policy to slow economywide spending and bring down inflation.
“Open the window of your cubicle at work if you can’t hear it because thousands of Americans have lost their employment, which rings the recession alarm bells loud and clear,” said Chris Rupkey, chief economist at Fwdbonds. “You can’t have a recession without job losses, and this week’s unemployment claims show the recession sky is darkening.”
For a long stretch toward the end of the summer, new jobless claims defied expectations and remained low — despite the Federal Reserve’s aggressive and historic rate hikes. Since the start of October, though, they have been above 210,000.
The Fed has been aggressively jacking up interest rates to tame inflation, but the trade-off is that rising interest rates slow demand and can result in a recession.
Last month, the central bank conducted another huge three-quarters of a percentage point, or 75 basis points, rate increase. It was the fourth such increase in just five months — the largest increase in four decades.
Fed Chairman Jerome Powell has made it clear the Fed won’t let up with tightening until inflation starts returning to its preferred 2% rate, although recent comments indicate the pace of the tightening will begin to slow.
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“The full effects of our rapid tightening so far are yet to be felt,” Powell said during a speech at the Brookings Institution. “Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down.”
“The time for moderating the pace of rate increases may come as soon as the December meeting,” he added.
