US Job Claims Hit 196k as Mortgage Rates Jump 100bps
Initial unemployment claims fell to 196,000 last week, signaling a stable labor market despite rising borrowing costs.
Initial claims for US unemployment benefits dropped by 10,000 to a seasonally adjusted 196,000 for the week ended September 12. This figure marks the lowest level since mid-July and falls below the 208,000 forecast by Reuters-poll economists. The decline was likely exaggerated by the Labour Day holiday, but the underlying trend points to continued stability.
The Federal Reserve raised its overnight benchmark interest rate by 25 basis points to the 3.75 to 4.0 percent range on Wednesday. This is the first increase since July 2023. The move reflects a strategy to combat inflation stemming from the Middle East conflict, with policymakers signaling further hikes in the months ahead.
Labor data shows steady underlying trends
The four-week moving average of initial claims fell by 2,750 to 203,250. This metric is considered a better measure of labor market trends as it smooths out weekly volatility. Continuing claims, which serve as a proxy for hiring, dropped by 39,000 to 1.73 million. This is the lowest level since January 2024.
Fed Chairman Kevin Warsh described the labor market as a basic sign of strength. He noted that the unemployment rate is running consistent with full employment. The August unemployment rate stood at 4.1 percent, held down by low layoffs and a smaller labor force.
Mortgage rates surge pressures housing
The average rate on a 30-year fixed-rate mortgage has jumped nearly 100 basis points since the Iran war began. Rising inflation is boosting these borrowing costs, which puts direct pressure on the housing sector. The Federal Reserve remains laser-focused on inflation despite the solid footing of the job market.
Market reaction to rate decision
Wall Street stocks rose as investors took heart from a pullback in oil prices. However, oil prices stayed above $100 a barrel on fears the Middle East conflict could widen. The dollar eased against a basket of currencies, while US Treasury yields fell. The yield on the benchmark 10-year note slid to around 4.947 percent.
Economists note that businesses remain hesitant to boost hiring due to headwinds from the conflict. The four-week average of claims was little changed between the August and September survey weeks. This suggests steady labor market conditions according to data reported by GN auto markets/housing: rental market.
