The number of new applications for unemployment benefits dropped by 2,000 to 222,000 last week, the Labor Department reported Thursday.
Falling jobless claims are a sign the economy is still adding jobs despite the Federal Reserve’s efforts to tighten monetary policy to slow economywide spending and bring down inflation.
For a lengthy stretch between early August and the middle of September, jobless claims defied expectations and remained low — even despite the Federal Reserve’s aggressive and historic rate hikes. Since the start of October, though, they have been above 210,000.
The Fed has been aggressively jacking up interest rates to tame inflation, although the trade-off is that rising interest rates slow demand and can result in a recession.
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Earlier this month, the central bank conducted another three-quarters of a percentage point, or 75 basis point, rate increase. It was the fourth such increase in just five months.
The economy got a bit of good news last week when the consumer price index showed that annual inflation slowed to 7.7% in October, down half a percentage point from September. The extent of the slowdown increased confidence that the Fed will begin to slow its campaign to curb inflation via interest rate hikes.
The prospect of looser money boosted stock valuations.
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Still, many economists think that the aggressive pace of rate hikes throughout the year is bound to catch up and result in a recession. Recent economic modeling by Bloomberg and the Conference Board has forecast the odds of a recession in the next 12 months as a near certainty.
