U.S. Employment Pressures Intensifies due to Hurricane and Layoffs
The number of initial unemployment claims in the United States has reached the highest level since August last year, and hurricanes and layoffs have seriously damaged the employment environment.
According to the latest data released by the U.S. Department of Labor, the number of people claiming initial unemployment benefits reached 258,000 in the week ending October 5, the highest level since August 2023, far exceeding market expectations of 230,000. The increase in the number of unemployed people was mainly affected by the damage caused by Hurricane Helene to Florida, North Carolina and other places, resulting in a large number of workers applying for unemployment benefits.
In addition, a wave of layoffs caused by strikes at Boeing Co. (BA) also pushed up the unemployment data. The short-term shock of hurricanes and strikes has increased market uncertainty and created challenges for the Federal Reserve (FED) in assessing labor market conditions.
Not only did the number of people claiming initial unemployment benefits increase significantly, but the number of people continuing to receive unemployment benefits in the week of September 28 also increased to 1.861 million from 1.819 million the previous week, which was higher than the market expectation of 1.83 million, indicating that many industries in the United States are facing The pressure, especially the impact on manufacturing and supply chains, is more obvious.
Michigan has seen a sharp increase in initial jobless claims, partly due to automaker Stellantis (STLA) cutting shifts. In addition, the Boeing strike has also affected related supply chain companies, causing many temporary workers to be forced to take leave, exacerbating pressure on the job market.
Despite the rise in unemployment claims, the U.S. job market as a whole still shows some resilience. The September non-farm payrolls report showed that 254,000 new jobs were created, far exceeding market expectations of 150,000, while the unemployment rate unexpectedly dropped to 4.1%.
These data alleviated to some extent the market's concerns about the continued deterioration of the labor market. However, hurricanes and strikes are likely to continue to generate volatility in unemployment data in the coming weeks, making the Fed face greater uncertainty when making monetary policy decisions.
Nancy Vanden Houten, chief U.S. economist at Oxford Economics, said unemployment data are likely to continue to fluctuate in the coming weeks as the effects of Hurricanes Helen and Milton unfold, which will provide guidance for the Federal Reserve. Adding uncertainty when measuring job market developments.
David Miller, Chief Information Officer and Senior Portfolio Manager of Catalyst Funds, believes that although economic growth may slow down in the short term, especially under the influence of rising interest rates, the fundamentals of the U.S. economy remain healthy. GDP growth in the fourth quarter is expected to be between 2% and 3%, with inflation remaining around 2%.
In addition to the impact of the hurricane, manufacturing layoffs and supply chain shutdowns have also brought greater challenges to the job market. The Boeing strike has lasted for nearly a month. Although striking workers have been unable to apply for unemployment benefits, the impact of the strike has spread to other companies that rely on Boeing's business. Many temporary workers and supply chain workers have been forced to stop work, further exacerbating market uncertainty.
The U.S. real GDP annualized growth rate in the second quarter was 3.0%, significantly higher than the 1.4% in the first quarter. The growth was driven primarily by increases in consumer spending and nonresidential fixed investment. However, as the Federal Reserve continues to adjust interest rates to combat inflation, economists generally predict that economic growth may slow in the fourth quarter. Volatility in the job market has also increased uncertainty about policy adjustments, and the market will pay close attention to the Fed's next move.
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