US unemployment claims rise to 258,000, highest level in year world news

Claims will continue to be higher in states hit by Helen and Hurricane Milton, as well as the Boeing strike, said Nancy Vanden Houten, chief U.S. economist at Oxford Economics. However, we believe that the Fed will consider these effects to be temporary and still expects an interest rate cut (25 basis points) at its November meeting.

Vanden Houten said Washington state suffered the most from the Boeing strike and accounted for a disproportionate share of the increase.

Unemployment benefit claims are considered representative of U.S. layoffs for the week, but may be variable and subject to revisions.

The four-week average for claims, which alleviated some of that weekly volatility, rose from 6,750 to 231,000.

The total number of Americans collecting unemployment benefits rose by 42,000 in the week ending Sept. 28 to nearly 1.86 million, the highest since late July.

Beyond weather and labor strife, some recent labor market data suggests that higher interest rates may eventually have an impact on the labor market.

In response to weakening employment data and falling consumer prices, the Federal Reserve cut its benchmark interest rate by half a percentage point last month as the central bank shifted its focus from controlling inflation to supporting the labor market. The Fed's goal is to achieve a rare soft landing in which it lowers inflation without causing a recession.

It was the Fed's first rate cut in four years, following a series of increases in 2022 and 2023 that pushed the federal funds rate to a two-decade high of 5.3%.

Inflation has been falling steadily, approaching the Fed's 2 percent target, and Chairman Jerome Powell recently announced that it is largely under control.

In a separate report on Thursday, the government said U.S. inflation had reached its lowest level since February 2021.

Unemployment claims averaged just 213,000 per week in the first four months of 2024, before a spike in May. They reached 250,000 in late July, supporting the view that higher interest rates are finally cooling the red-hot U.S. labor market.

In August, the Department of Labor reported that from April 2023 to March of this year, the U.S. economy added 818,000 fewer jobs than originally reported. The revised numbers were also seen as evidence that the labor market was continuing to slow, prompting the Fed to start cutting interest rates.

Despite some signs of a slowdown in the labor market, U.S. employers added a surprising 254,000 jobs in September, allaying some concerns about a weak labor market and suggesting that the pace of hiring is strong enough to support a growing economy.

Last month's gain was bigger than economists expected and up sharply from the 159,000 jobs added in August. After rising for most of 2024, the unemployment rate fell for the second month in a row to 4.1%. in September from 4.2 percent in August.