Inflation Has Slowed, But What About The Labor Market?

<p>&nbsp;The number of Americans applying for unemployment benefits jumped last week, but not enough to raise concerns about the consistently strong US labor market.</p><p><br /></p><p>US applications for jobless benefits rose by 21,000 to 248,000 for the week ended August 5, from 227,000 the previous week, the Labor Department reported on Thursday. This is the highest number in five weeks.</p><p><br /></p><p>The four-week moving average for claims, a more or less volatile reading, rose by 2,750 to 228,250. Jobless benefit claims are widely considered to represent the number of layoffs in a given week.</p><p><br /></p><p>Jobless claims topped 260,000 for several weeks this spring, raising some concerns, but they have since slowed.</p><p><br /></p><p>The high level of inflation forced the Federal Reserve to raise interest rates at a very rapid pace for a year and a half: the central bank has raised the reference rate 11 times to 5.4%, the highest level in 22 years.</p><p><br /></p><p><br /></p><p>Part of the Fed's rationale is to cool the job market and lower wages, which in theory suppresses price growth. Although inflation has fallen significantly over the period, the labor market remains strong.</p><p><br /></p><p>Last week, the Labor Department reported that US employers added 187,000 jobs in July, fewer than expected, but still a healthy number. The unemployment rate fell to 3.5%, close to the lowest level in half a century.</p><p><br /></p><p>Also last week, the government reported that job openings fell below 9.6 million in June, the lowest in more than two years. However, this number is still incredibly strong considering that monthly employment opportunities have never exceeded 8 million before 2021.</p><p><br /></p><p>Outside of a flurry of layoffs in the tech sector earlier this year, companies have mostly retained employees.</p><p><br /></p><p>Many businesses are struggling to replenish their workforces after cutting jobs during the pandemic, and much of the ongoing hiring may reflect the efforts of many firms to catch up with the high levels of consumer demand that have emerged since the pandemic recession.</p><p><br /></p><p>In all, 1.68 million were in unemployment benefits in the week ending July 29, about 8,000 fewer than the previous week.</p>