New weekly filings for unemployment insurance—a proxy for layoffs and a labor market barometer—fell more than expected last week, to a three-week low, with experts saying that the Federal Reserve will likely see this as a sign of labor market tightness and, therefore, will have no reason to pause in its aggressive monetary-tightening cycle.
“Jobless claims edge lower while continuing claims rise. Fed likely to see this as another indication of a tight labor market,” noted Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research, in a statement.
Faced with inflation running near a 40-year high and outpacing wage gains for many Americans, the Fed has been hiking interest rates at their fastest pace since the 1980s. The Fed’s key policy rate has jumped from near zero in March to a current target range of 3.00–3.25 percent.
But so far, there are few signs that this level of interest rates is doing much to curtail inflation and bring it closer to the Fed’s target of 2 percent.
Fed Chair Jerome Powell said in September that he was hoping the central bank’s policy moves would bring down the number of job vacancies, which remain far higher than the number of unemployed persons.
Bringing the labor market into greater balance inevitably means the unemployment rate will have to rise, though Fed officials hope it won’t go too high.
The U.S. unemployment rate fell to 3.5 percent in September from 3.7 in August, suggesting the Fed’s actions were having little impact on the labor market.