Rising jobless claims, a proxy for layoffs, are a sign the unusually strong labor market is finally starting to react to the Federal Reserve’s efforts to tighten monetary policy to slow economywide spending and bring down inflation. Claims have been trending upward in recent weeks.The weekly jobless claims number has been closely watched over the past year, given the Fed has been hiking aggressively.
Despite the job market’s rip-roaring strength for months, even as the Fed tightened, there are now some signals the labor market is beginning to soften in response to the barrage of rate revisions, the most recent of which being a quarter of a percentage point increase in the federal funds rate last month.
The March employment report also showed that wage growth is slowing. There was a mere 0.3% increase in average hourly earnings, pushing the annual increase to 4.2% — the lowest it has been since June 2021, right when inflation began meaningfully rising.
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