Jobless Claims Jump, Signaling Softening Labor Market: What You Need To Know

The U.S. labor market continues to move in the wrong direction as initial jobless claims rose to the highest levels seen this year.

What Happened: Claims jumped 7,000 for the week ended July 16 to 251,000 total, according to data the Labor Department released on Thursday.

The number came in above average economist estimates of 240,000. The four-week moving average was 240,500, up 4,500 from the previous week's revised average.

Filings for unemployment insurance have now jumped to the highest levels since the middle of November, adding to concerns of a softening job market. The increasing level of claims indicates that rising interest rates and a slowing economy are starting to take a toll on the labor market. 

Several companies have also announced job cuts in 2022, pointing to a softer labor market.

Microsoft Corp MSFT and Alphabet Inc GOOG are among the latest companies to pull in the reins on hiring. Apple Inc AAPL also reportedly plans to slow hiring in 2023.

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Why It Matters: The Federal Reserve has embarked on what is expected to be its most aggressive tightening cycle in more than 40 years as the central bank attempts to tame rising inflation. 

The Fed raised interest rates by three-quarters of a percentage point in June and is expected to raise rates by the same amount next week. 

As part of a congressionally mandated semiannual report on monetary policy, Fed chair Jerome Powell testified on inflation in front of the Senate Banking Committee last month.

"Over coming months, we will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2%," Powell said. "We anticipate that ongoing rate increases will be appropriate. The pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy."

Photo: David Vives from Pixabay.