Jobless claims hit five-month low despite Fed’s efforts to slow labor market

A person arranges groceries in El Progreso Market in the Mount Pleasant neighborhood of Washington, D.C., August 19, 2022.

Even as the Federal Reserve tries to slow things down, initial unemployment claims fell to their lowest level in five months.

The Labor Department reported Thursday that there were 193,000 jobless claims for the week ended September 24.

The number of claims fell below 200,000 for the first time since May.

The number of continuing claims fell by 29,000.

Fed efforts to cool the economy and bring down inflation are behind the strong labor numbers. The tight labor market has been pointed out as a target of the policy tightening.

The report caused the stock market to plunge while the Treasury yields went up.

Jim Baird, chief investment officer at Plante Moran Financial Advisors, said that the recent decline in layoffs flies in the face of the Fed's efforts to make labor market conditions more favorable. The capital markets are listening to the Fed. The jobs market isn't mentioned. It is not listening at the moment.

The inflation news was bad for the Fed.

The Commerce Department reported in its final GDP estimate that the personal consumption expenditures price index increased 7.3% in the second quarter. It was just off the 7.5% gain in the first quarter, but it was still above the previous two Q2 estimates.

Excluding food and energy, core PCE inflation was 4.7%, higher than the previous two estimates but below the 5.6% jump in the first quarter.

The Fed has raised interest rates five times in a row for a total of 3 percentage points, and officials stress the importance of continuing to hike until inflation comes down closer to the central bank's 2% target.

If we don't get back to price stability, we can't have a healthy economy and good labor markets over time, according to the Cleveland Fed President.

Even with a decline in gas prices, the Cleveland Fed's Inflation Nowcasting gauge shows little improvement in September. The gauge shows a 8.2% increase in the headline consumer price index and a 6.6% increase in the core prices compared to August.

The final estimate of Q2 GDP was a decline of 0.6%, the same as the previous two estimates. It was the second quarter in a row that GDP was negative.