Jobless Claims Lower as Fed Watches Labor Market Strength

Initial jobless claims fell last week, as Federal Reserve officials keep a sharp eye on the labor market for signs of weakness.

The number of people making their initial unemployment insurance claim for the week ended July 6 came in at 222,000, a drop of 17,000 from an upwardly revised figure from the prior week, Labor Department data showed. Economists were expecting a larger result of 236,000 jobless claims.

The four-week moving average, which economists use as a less-volatile measure, was lower from the previous week by 5,250 claims. 

Why Does the Federal Reserve Care?

As of late, the labor market has slowed under the weight of the Federal Reserve’s campaign of anti-inflation interest rate hikes as it drags on business and consumer spending. 

In recent days, Fed officials have emphasized the importance of labor market data. Chair Jerome Powell told Congress this week that the Fed is now attempting to balance risks of rising unemployment and reigniting inflation. A sharp rise in unemployment could prompt the central bank to move more quickly on interest-rate cuts.

“The latest data do show that we've had considerable cooling in the labor market,” Powell told Congress on Tuesday. 

While claims were lower this week, Nancy Vanden Houten of Oxford Economics said seasonal factors related to Independence Day made the data “noisy” and difficult to use to identify trends. She pointed to continuing jobless claims, which rose for the first time since mid-April. 

“Take a step back from seasonal noise, the claims data are consistent with a labor market characterized by a slower pace of hiring but still relatively few layoffs,” wrote Vanden Houten.