Finding a Job May Get Harder

More Americans sought unemployment benefits for the week ending on October 21, which economists suggested could be a sign that employers may be slowing down on hiring amid high prices and elevated costs of borrowing. Meanwhile, for those looking for jobs, it may also be getting harder to find employment.

Initial unemployment claims increased by 10,000 to 210,000, the Department of Labor said on Thursday, but that was lower than some expectations of 205,000. For the monthly average, the claims ticked up to 207,500, an increase of 1,250 from the previous week's revised average.

The claims showed slight signs that the labor market may be softening could suggest that the Federal Reserve's hiking of rates is hurting employers as their cost of capital has risen as a result.

Earlier this week, Torsten Sløk, chief economist at private equity firm Apollo Global Management, pointed out that small businesses are now paying 10 percent interest on short-term loans, citing data from the National Federation of Independent Business. That has, in turn, forced them to pull back on investing on their businesses and slow down hiring, he said.

But the Thursday jobless claims showed little signs that people are getting fired, economists say.

"Initial jobless claims edged higher," lead U.S. economist at Oxford Economics Nancy Vanden Houten said, "but remain at low levels consistent with few layoffs."

Yet people may may be struggling to find jobs. Continued claims are at their highest since May, Vanden Houten pointed out, suggesting people are relying on jobless benefits for longer as they search for work.

"The upturn in continued claims suggests that, while the labor market may be characterized by few job losses, unemployed individuals are finding it more difficult to find new jobs, which would be consistent with a slower pace of hiring," she said.

The claims suggested that people are still able to retain their jobs at a level that the Fed—which gathers next week—may think is not consistent with bringing inflation down to its 2 percent target. The latest from the labor market signals that central bank policymakers may need to hold rates higher for a little longer.

"Our current forecast is for no additional rate hikes, and we think a hike at next week's meeting is especially unlikely," Vanden Houten said. "The Fed will need to see more softening of labor market conditions to be persuaded that inflation is on a sustainable path back to 2% before embarking on rate cuts."

She added: "We do expect slower job growth and some modest job losses early in 2024 although given the strong performance of the economy in Q3 the risk may be those occur later in the year, pushing the first rate cut to the second half of 2024."