Jobless claims lowest in three months
by Zachary Halaschak, Economics Reporter
September 08, 2022 08:32 AM
The number of new applications for unemployment benefits dropped by 6,000 to 222,000 last week, the lowest since June, defying fears of a recession, the Labor Department reported Thursday.
Falling jobless claims, a proxy for layoffs, are a sign that the economy is still adding jobs despite the Federal Reserve's efforts to tighten monetary policy to slow economywide spending and bring down inflation.
In recent weeks, jobless claims have ticked down despite other signs of economic turbulence, such as that GDP growth has turned negative and the housing market has been upended by rising interest rates.
Still, the number of new claims for unemployment isn’t anywhere near where it was during most of the pandemic and has not risen to a rate that would suggest an imminent recession.
Rising jobless claims would be a clue that the tight labor market may be slowing in response to the Fed aggressively raising interest rates. Driving up interest rates slows demand and can result in recessionary conditions.
In order to fight explosive inflation, the Fed has been hiking rates at a historic rate and in June and July conducted two 75-basis-point hikes, which are akin to six typical rate hikes in just two months.
The action, which has become increasingly more desperate, is designed to slow spending, and many economic experts see the Fed’s task of driving up rates while avoiding a recession as increasingly impossible. The more the central bank is forced to hike rates, the higher the odds become of the United States entering an economic downturn.
GDP growth fell at a 0.9% annualized rate in the second quarter, a preliminary estimate from the Bureau of Economic Analysis recently showed. The report marks the second straight quarter of declining inflation-adjusted GDP — a situation commonly used to define a recession.
An indication that the economy is not in or near recession, though, is that the economy is adding jobs in huge numbers and the unemployment rate is low.
The economy beat expectations and added 315,000 jobs in August. The unemployment rate ticked up slightly to 3.7%, still near the ultralow level it was at prior to the pandemic.
https://www.washingtonexaminer.com/policy/economy/jobless-claims-lowest-in-three-months
