Jobless claims hit five-month lows despite Fed efforts to slow job market

Initial jobless claims fell last week to their lowest level in five months, a sign the job market is strengthening even as the Federal Reserve is trying to slow things down.

Unemployment claims for the week ending September 1. 24 totaled 193,000, a decrease of 16,000 from the previous week’s downwardly revised total and below the 215,000 Dow Jones estimate, according to a report from the Department of Labor Thursday.

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The drop in claims was the lowest level since April 23 and the first time claims fell below 200,000 since early May.

Continuing claims, which are a week behind schedule, fell 29,000 to 1.347 million.

Strong jobs numbers come amid Fed efforts to cool down the economy and reduce inflation, which is near its highest levels since the early 1980s. Central bank officials have specifically pointed to the tight labor market and its upward pressure on wages as a target of policy tightening.

Stocks plunged after the report, while Treasury yields were higher.

“The recent decline in layoffs runs counter to the Fed’s efforts to ease labor market conditions and bring inflation down toward its 2% target,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “Capital markets have listened to the Fed and investors are feeling the pain. But the labor market? At least for now, it’s not listening.”

There was more bad news Thursday for the Fed on the inflation front.

The personal consumption expenditures price index, a favorite inflation gauge of the Fed, showed a year-on-year price increase of 7.3% in the second quarter, the Department of Commerce reported in its final estimate of GDP for the period. That was above the 7.1% reading in the previous two estimates for the second quarter and just below the 7.5% gain in the first quarter.

Excluding food and energy, core PCE inflation was 4.7%, 0.3 percentage point higher than the previous two estimates, but down from the 5.6% jump in the first quarter.

The Fed has raised interest rates five times in 2022 by a total of 3 percentage points, and officials have stressed the importance of continuing to raise until inflation approaches the central bank’s 2% target.

“We have to do what we have to do to get back to price stability, because we can’t have a healthy economy, we can’t have good labor markets over time, unless we get back to price stability,” said Loretta, president of the Cleveland Fed. Mester told CNBCsquawk box” in an interview Thursday morning.

However, the Cleveland Fed itself Inflation Nowcasting Meter shows little improvement on the inflation front in September, even with a sharp drop in gas prices. The indicator indicates an 8.2% increase in the general consumer price index and a 6.6% increase in core prices, compared to the respective readings of 8.3% and 6.3% in August. .

The BEA’s final estimate for second quarter GDP was a 0.6% decline, unchanged from the previous estimate. That was the second consecutive quarter of negative GDP, meeting a commonly accepted definition of a recession.