Inman News
Initial jobless claims climbed last week to the highest level since Oct. 23, 2021, but investors and economists are expecting 3 small rate cuts this year rather than a dramatic move on Sept. 17
Tariffs helped push up the price of goods and services up by 2.92 percent from a year ago in August — the fourth month in a row that inflation has moved away from the Federal Reserve’s 2 percent inflation goal.
Thursday’s Consumer Price Index report from the Bureau of Labor Statistics all but rules out a 1/2 percentage point “jumbo” rate cut at next week’s Fed meeting, but central bank policymakers are still expected to bring rates down gradually this year and next.
Fed Chair Jerome Powell last month acknowledged that policymakers are starting to see unemployment as a bigger risk to the U.S. economy than inflation.
The Department of Labor reported Thursday that initial jobless claims climbed to a seasonally adjusted 263,000 last week, the highest level since Oct. 23, 2021.
Most of the surprise jump in jobless claims was attributed to the impact of flash floods in July that killed more than 100 people in Texas.
But the report comes on the heels of Sept. 5 payrolls data that showed employers added just 22,000 jobs to U.S. payrolls in August and that the unemployment rate ticked up to 4.3 percent, with 7.38 million Americans out of work.
Given the low level of job openings and a rise in layoff announcements, economists at Pantheon Macroeconomics expect initial jobless claims will swell to an average of 250,000 a week during the final three months of this year.
Jobless claims hit new 2025 high
“Unemployment probably will rise at a faster pace than continuing claims, as new entrants who struggle to find work will be ineligible to claim, and as a rising number of claimants reach the end of the 26-week entitlement” for benefits, Pantheon Chief U.S. Economist Samuel Tombs said in a note to clients.
Forecasters at Pantheon expect the unemployment rate to peak at 4.75 percent early next year, he said.
Tariffs push inflation away from Fed’s target
Since hitting a post-pandemic low of 2.31 percent in April, annual CPI inflation has been climbing for 4 months in a row. Core CPI, which excludes volatile food and energy prices, bottomed at 2.77 percent in May.