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Tuesday, July 5, 2022
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Report Shows Jobless Claims Rose in April


Unemployment rate graph | Image by FOTOGRIN

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Jobless claims took an unexpected jump last week, hitting a four-month high and raising concerns the market may be cooling in response to increasingly bad news about the economy.

According to a report released on Thursday by the U.S. Department of Labor, jobless claims for state unemployment benefits rose by 21,000, hitting a seasonally adjusted 218,000 for the week ending May 14. This marked the highest unemployment since January.

Per Reuters, economist Bill Adams suggests that investor reaction to the Federal Reserve’s new policy of aggressive interest rate hikes to fight inflation will further cool the economy.

Investors are responding to the policy with massive stock sell-offs. As a result, many of the nation’s top retailers reduced their annual earnings forecast, blaming inflation for lowering overall profit levels.

As corporations work to boost profits in this dire economic landscape, it makes sense that job growth may slow. This is particularly true in the retail and e-commerce industries. Additionally, the downturn in the stock market in recent weeks is working to make businesses less likely to hire, according to Adams.

Some experts believe the jump in jobless claims is simply a normalization of the labor market. The last few years have seen significant disruptions to the labor force as the COVID-19 pandemic ebbed and flowed, distorting labor metrics and undermining assumptions about the labor market.

“The tight labor market has likely caused employers to focus on employee retention, resulting in much lower-than-normal initial claims,” said economist Isfar Munir, per Reuters. “The increase we are seeing now could just be a first step towards normalizing labor markets.”

The housing market also reported poor data this week. According to the National Association of Realtors, existing-home sales dropped 2.4% to reach a seasonally adjusted annual rate of 5.61 million units in April.

This marks the lowest level since June 2020, when the housing market was in a tailspin after the COVID-19 lockdown.

Although monthly home sales were down for the third consecutive month, the median existing-home price rose by 14.8% from the year prior, reaching an all-time high of $391,200.

The report suggests the rapid acceleration in home values is due to low inventory driving up the prices, predicting that home sales will continue downward because of rising interest rates on 30-year fixed-rate mortgages. The average interest rate is now well over 5%.

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