2024-01-18 17:41:00
Investors entered 2024 expecting interest rate cuts, when the most optimistic expected a cut as early as March – but the inflation that rose in December and now also the strong labor data actually allow the Fed to wait with the cuts.
Decrease in new unemployment claims – the labor market continues to show resilience
The number of new claims for unemployment benefits last week was the lowest since September 2022 and reached 187 thousand, compared to analysts’ expectations of 208 thousand, and compared to 203 thousand from the week before. The biggest decrease was recorded in the state of New York where 20,800 new claims were filed compared to 38,000 claims the week before.
The weekly number of new jobless claims in the US
Despite the data, economists often prefer to wait for February’s data before pointing to one trend or another, and this is because January’s data tend to be more volatile as a result of the holiday season that begins with Thanksgiving in December and ends on Martin Luther King Day in January.
A decrease in the number of new unemployment claims means that it is easier for people to find work, which means that businesses are hiring more, and if businesses are hiring more, it means they have free money, which eliminates the need for the Fed to lower interest rates.
The Fed has every reason not to cut interest rates
As mentioned, inflation in the US rose to 3.4% in December, another factor that will negatively affect the Fed’s decision on whether to lower interest rates. Despite the increase in the consumer price index, the core price index, which omits more volatile components such as oil, food and energy and is considered a better measure of inflation , decreased and presented an annual increase of 3.9% compared to 4% in November, and this compared to analysts’ expectations of 3.8%.
Inflation rate in the US
The Fed’s core inflation forecast for 2024, as of the last decision in December, dropped to 2.4%, with inflation expected to reach the Fed’s target of 2% in 2026. The growth forecast was also updated to 1.4% from 1.5% next year.
Comments to the article (0):
Your response has been received and will be published subject to the system policy.
Thanks.
for a new comment
Your response was not sent due to a communication problem, please try again.
Return to comment
#labor #market #continues #show #strength #year #unemployment #claims