Jobless claims edge higher, as labor market remains relatively tight
Initial claims for Americans applying for first-time unemployment insurance edged higher by 2,000 to 234,000 for the week ended August 19, a bit below the 238,000 expected by economists. This result marks the 129th consecutive week that claims have come in below 300,000.
Despite the modest increase, the story is largely unchanged: the labor market is relatively tight and employers are hesitant to cut payrolls. The result is that weekly claims remain near a 44-year low, which is even more noteworthy given the growth in the size of the labor force over that period.
The four-week moving average of jobless claims declined by 2,750 to 237,750, also near its 40-year low mark. Compared to the long-term average of about 310,000, the current level of initial jobless claims is indicative of a healthy labor environment.
From a bigger picture perspective, most data points to solid labor market conditions. Job openings are at a record high, the jobless rate is at its lowest point in over 16 years, and job creation is on pace to reach 2.2 million. The importance of that last point shouldn’t be overlooked, particularly since the pool of available workers has been largely drained in recent years. It’s becoming increasingly difficult to fill positions, and the competition for labor has heated up.
If there’s an underlying concern, it’s that the strength of the labor market could push inflation higher, forcing the Fed to tighten policy. That process is already well underway, even though most inflation measures have remained in check to this point. Nonetheless, policymakers are motivated to tighten to insure that they don’t fall behind the curve and to provide the central bank with dry powder when the economy needs it at some point down the road.