WASHINGTON, Nov 16 (Reuters) – The number of Americans filing new claims for unemployment benefits increased to a three-month high last week, suggesting that labor market conditions continued to ease, which could help the Federal Reserve’s fight against inflation.
The weekly jobless claims report from the Labor Department on Thursday, the most timely data on the economy’s health, also showed unemployment rolls expanding to levels last seen two years ago. The labor market is cooling as higher interest rates curb demand, consistent with slowing economic activity.
It added to data this week showing subsiding inflation and a moderation in consumer spending in bolstering expectations that the Fed’s monetary policy tightening cycle is complete.
“The Fed is surely encouraged by recent inflation data but needs to see a further slowdown in the labor market and wage growth to be persuaded that inflation is on a sustainable path back to 2%,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York.
Initial claims for state unemployment benefits rose 13,000 to a seasonally adjusted 231,000 for the week ended Nov. 11, the highest since August. Economists polled by Reuters had forecast 220,000 claims for the latest week.
Unadjusted claims increased 1,713 to 215,874 last week. There was a jump in filings in Massachusetts and New York, which more than offset notable decreases in Oregon and Georgia.
The increase in claims aligns with the recent slowdown in hiring. Job growth slowed in October and the unemployment rate climbed to 3.9%, the highest level since January 2022. With 1.5 job openings per every unemployed person in September, conditions remain fairly tight.
Economists at Goldman Sachs said they did not believe that last month’s increase in the jobless rate was a bad omen, noting that the rise in the unemployment rate since April has come entirely from an expansion in the size of the labor force rather than a decline in employment.
The dollar fell against a basket of currencies. U.S. Treasury prices rose.
Financial markets are even anticipating an interest rate cut next May, according to CME Group’s FedWatch tool. Since March 2022, the Fed has hiked its policy rate by 525 basis points to the current 5.25%-5.50% range.
JOBLESS ROLLS RISING
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 32,000 to 1.865 million during the week ending Nov. 4, the highest level since November 2021, the claims report showed. The so-called continuing claims have increased since mid-September.
Most economists have attributed the rise to difficulties adjusting the data for seasonal fluctuations rather than a material change in the labor market. They expect this to be ironed out when the government revises the data next spring.
“It is not a reason to expect a materially higher unemployment rate in the November monthly jobs report,” said Lou Crandall, chief economist at Wrightson ICAP in New York.
While some agreed that the seasonal adjustment was an issue, they also viewed the sustained increase as a sign that more unemployed people were experiencing longer spells of joblessness.
The inflation outlook was bolstered by a separate report from the Labor Department’s Bureau of Labor Statistics on Thursday showing import prices falling by the most in seven months in October amid a broad decline in the costs of goods.
Import prices dropped 0.8% last month after rising 0.4% in September. Economists had forecast import prices, which exclude tariffs, falling 0.3%. In the 12 months through October, import prices declined 2.0% after decreasing 1.5% in September. Annual import prices have now dropped for nine straight months.
Imported fuel prices dropped 6.3%, reversing September’s gain. The cost of imported food fell 0.6% after dropping 0.4% in September. Excluding fuels and food, import prices dropped 0.2% after dipping 0.1% in September. These so-called core import prices decreased 1.3% year-on-year in September.
The dollar has strengthened against the currencies of the United States’ main trading partners this year, helping to dampen imported inflation pressures.
Prices for imported capital goods dropped 0.2% after being unchanged in the prior month. But the cost of motor vehicles, parts and engines rose 0.3% following a 0.1% gain in September.
Consumer goods, excluding automotives dipped 0.1% after being unchanged in September. The higher borrowing costs are cooling domestic demand.
Prices of goods imported from China were unchanged after edging down 0.1% in September. They dropped 2.8% year-on-year in October, the largest decline since October 2009.
The report also showed export prices fell 1.1% in October as prices for both agricultural and nonagricultural exports dropped. Export prices increased 0.5% in September. They tumbled 4.9% year-on-year in October after declining 4.3% in September.
Reporting by Lucia Mutikani; Editing by Andrea Ricci
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