Continuing Unemployment Claims Reach 4-Year Peak

Initial jobless claims rose by 7,000 to 226,000, coming in above forecasts though remaining low on a historical basis. The more telling figure remains continuing claims – the number of people still receiving unemployment benefits after their first week. These rose by 38,000, reaching a new cycle high of 1.974 million, and the highest level since November 2021. Continuing claims have held stubbornly above 1.8 million for over a year and are now consistently above 1.9 million for elevenstraight weeks.

What’s the bottom line?
The Federal Reserve closely monitors employment data when making decisions about interest rates. It operates under a dual mandate: to keep inflation in check and support maximum employment. However, these goals can sometimes be at odds. High inflation typically prevents the Fed from lowering rates, while signs of an economic slowdown may prompt it to consider doing so.

So far this year, the Fed has kept its benchmark interest rate, the Federal Funds Rate, unchanged. Ongoing economic uncertainty, including new tariffs and persistent inflation concerns, has led the Fed to take a cautious “wait and see” approach. While the Fed Funds Rate doesn’t directly set mortgage rates, it does influence borrowing costs across the broader economy.

Recently, signs of a weakening job market – such as the softer July jobs report and a steady rise in unemployment claims – have fueled speculation that the Fed could cut rates at its next meeting on September 17. Looking ahead, upcoming inflation and employment reports will play a key role in shaping the Fed’s next move.