Job cuts surged in September, and unemployment claims broke a streak of improvements last week in the latest signs that the red-hot labor market may finally be cooling as a result of the Federal Reserve’s interest rate hikes—a welcome development for investors but a concerning sign for the millions of unemployed Americans.
U.S.-based employers announced nearly 30,000 cuts in September, up 46% from August and nearly 68% from one year ago—marking the fifth month this year that cuts were higher than in 2021, career services firm Challenger, Gray & Christmas reported Thursday morning.
“Some cracks are beginning to appear in the labor market,” the firm’s Andrew Challenger said in a statement, adding that the cooling housing market and Fed’s rate hikes are leading to job cuts among mortgage staff at banks and lenders and that recession concerns have fueled increased uncertainty.
Meanwhile, hiring intentions, which measure the number of new jobs employers plan to add, fell to their lowest level since 2011—suggesting the retail and warehousing firms typically preparing for the holiday season by ramping up hiring are instead waiting to see whether consumers will actually show up, notes Challenger.
In another sign of the labor market finally starting to cool, new jobless claims jumped 15% to 219,000 last week, coming in higher than projected and ending a ten-week streak of better-than-expected data, according to the Labor Department on Thursday.
In emailed comments, Pantheon Macro chief economist said the rising claims aren’t indicative of a changing trend yet, especially since so many firms are still reporting difficulties in finding and retaining workers, but that claims could rise to 230,000 next week, their highest point since late August.
Despite widespread reports of layoffs hitting giant corporations, the labor market has remained one of the economy’s strongest pillars this year. According to Challenger, U.S. employers have announced plans to cut nearly 210,000 jobs, down 21% from the 265,000 cuts announced at this point last year and marking the lowest total for the period since at least 1993. Fed officials have long pointed to the strong job market as justification for their aggressive interest rate hikes, which work to tame inflation by slowing the economy. As a result, investors are hoping for worse-than-expected jobs data to help justify smaller hikes.
What To Watch For
The Labor Department is slated to release its employment report for September on Friday morning. On average, analysts project the economy added about 275,000 new jobs last month. Anything better than that could push markets down.
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