The number of people claiming unemployment benefits in the US fell for the third week in a row. That’s good news for American workers, but potentially bad news in the fight against inflation as the Federal Reserve has been raising its benchmark interest rates for a year in an effort to cool the economy, loosen the labor market and curb inflation .
The number of U.S. jobless claims for the week ended Feb. 25 fell to 190,000 from 192,000 the previous week, the Department of Labor said Thursday. It is the seventh consecutive week that claims have fallen below 200,000.
The four-week moving average of claims, which offsets some of the weekly volatility, rose 1,750 to 193,000, remaining below the 200,000 threshold for the sixth week in a row.
Claims for unemployment benefits are considered an indicator of the number of layoffs in the US
In February, the Fed raised its key lending rate by 25 basis points, the eighth rate hike in less than a year. The central bank’s reference rate is now between 4.5% and 4.75%, the highest level in 15 years.
The Fed’s aggressive interest rate policy seemed to slow inflation, but recent data suggest otherwise. Some economists now expect the Fed to raise its benchmark rate by a substantial half a percentage point when it meets later this month.
The Fed’s rate hikes have done little to cool the sweltering US job market, which has put upward pressure on wages and thus prices.
Last month, the government reported that employers added a better-than-expected 517,000 jobs in January and the unemployment rate fell to 3.4%, the lowest level since 1969. Fed policymakers have predicted that the unemployment rate will reach a high by the end of this year, a significant increase historically associated with recessions.
While the US job market remains strong, layoffs are piling up in the technology sector, where many companies have worked overtime following a pandemic. IBM, Microsoft, Amazon, Salesforce, Facebook parent company Meta, Twitter and DoorDash have all announced layoffs in recent months.
The real estate sector has also been battered by the Fed’s rate hikes. Higher mortgage rates – currently above 6% – have slowed home sales for 12 consecutive months. That’s almost in line with the Fed’s rate hikes that began last March.
About 1.66 million people received unemployment assistance in the week ending Feb. 18, a decrease of 5,000 from the previous week.