US Jobless Claims and Federal Reserve's Rate Decision

Investing.com — The number of Americans filing for first-time unemployment benefits rose by less than anticipated last week, indicating a reasonably healthy US labor market. This follows the Federal Reserve's recent interest rate cut, the first in over four years.

Initial Jobless Claims

Initial jobless claims in the U.S. increased to 219,000 for the week ending on Sept. 14, compared to an upwardly revised 231,000 the previous week. Economists had anticipated 230,000 claims.

Continuing Claims

The number of individuals receiving benefits after the initial week, known as continuing claims, decreased by 14,000 to a seasonally adjusted 1.829 million.

Federal Reserve Rate Cut

The US central bank began its latest rate-cutting cycle on Wednesday, reducing interest rates for the first time since March 2020 by 50 basis points to a range of 4.75% to 5%.

Fed Chair Jerome Powell mentioned that risks between higher inflation and labor market weakness are now balanced, and further cuts may be on the horizon if inflation falls.

However, Powell emphasized that the Fed would refrain from returning to the ultra-low rate policies seen during the pandemic, asserting that the Fed's neutral rate will be significantly higher moving forward.

Traders currently estimate a 67% probability that the central bank will decrease interest rates by 25 basis points in the upcoming November meeting, according to the CME Group's FedWatch tool.

Analysts from JPMorgan noted, "If labor markets continue to soften, we could see larger rate cuts. If job growth and unemployment stabilize, then a gradual move back to neutral could proceed."

JPMorgan also predicts a 50 basis point cut at the next meeting contingent upon additional easing in upcoming job reports, stating that more benign labor data could facilitate a gradual easing strategy for the Federal Open Market Committee (FOMC).