The number of new applications for unemployment benefits dropped by 20,000 to 211,000 last week, the Labor Department reported Thursday.
This week’s jobless claims number is being closely watched for signs of labor market fallout from the Federal Reserve’s efforts to raise interest rates at a historic pace. The report comes a day after the central bank hiked rates by 50 basis points.
Falling jobless claims are a sign the economy is still adding jobs despite the Fed’s efforts to tighten monetary policy to slow economywide spending and bring down inflation.
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For a long stretch toward the end of the summer and the beginning of the fall, jobless claims defied expectations and remained low — even despite the Fed’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, although 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 increases in four decades. But this week, the Fed let off the brakes a bit and hiked rates by only 50 basis points, a sign that inflation is slowing and the central bank fears a possible recession.
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“Over the course of the year, we’ve taken forceful actions to tighten the stance of monetary policy,” Fed Chairman Jerome Powell said during a Wednesday press conference following the meeting. “We’ve covered a lot of ground, and the full effects of our rapid tightening so far are yet to be felt. Even so, we have more work to do.”
