The U.S. labor market showed signs of slowing down as the number of Americans filing new claims for unemployment benefits increased last week. The government reported an 11,000 increase in initial claims for state unemployment benefits, reaching a seasonally adjusted 239,000 for the week ended April 8. This is an indication that higher borrowing costs are dampening demand in the economy, leading to more unemployment claims.
Economists polled by Reuters had previously predicted 232,000 claims for the latest week, while annual revisions to the data published by the government last week showed claims higher than previously estimated. Claims, however, are still below 270,000, which economists say would signal a deterioration in the labor market.
Last Friday's employment report showed solid job growth in March and a falling unemployment rate back to 3.5%. However, wage gains remained moderate, and job openings fell below 10 million at the end of February for the first time in nearly two years. The situation could make it easier for some laid off workers to land a job, but small businesses like restaurants, bars, and nail salons may be affected by a credit crunch.
The Federal Reserve is expected to raise rates by another 25 basis points at its May 2-3 policy meeting, according to CME Group's FedWatch tool. This will likely be the last rate hike in the U.S. central bank's fastest monetary policy tightening campaign since the late 1980s. Despite this, there are no signs yet that a tightening in credit conditions has led to job losses, and economists remain cautiously optimistic about the future of the labor market.
