TThe number of new jobless claims fell by 12,000 to 214,000 last week, the Labor Department reported on Thursday.
Plunging jobless claims are a sign that layoffs are few and the economy is creating jobs, despite efforts by the Federal Reserve to tighten monetary policy to slow aggregate spending and lower inflation.
“The whole world seems to be banking on a US recession, but so far the labor market has refused to support such a negative economic outlook,” noted Christopher Rupkey, FWDBONDS chief economist.
MORTGAGE RATES ARE HIGHEST IN TWO DECADES INCLUDING FED TIGHTENING FALLOUT
For an extended period between early August and mid-September, jobless claims defied expectations and remained low. However, they have been above 210,000 since the beginning of October.
The number of new jobless claims Thursday is nowhere near what it has been during most of the pandemic, and not at a rate that would indicate an impending recession.
The Fed has aggressively hiked interest rates to tame inflation. An increase in interest rates slows demand and can lead to recessionary conditions.
Last month, the central bank implemented a gargantuan rate hike of three-quarters of a percentage point, or 75 basis points. It was the third such increase in just four months.
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Despite the rate hikes, the labor market has proven resilient. The economy added 263,000 jobs last month, according to the Bureau of Labor Statistics. Monthly job growth has averaged 420,000 so far in 2022, a strong pace at this stage of the cycle.
The strong job market, coupled with higher-than-expected inflation, increases the likelihood that the central bank will keep up with monster rate hikes, something economists are increasingly concerned could plunge the economy into a recession.
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