Labor Market Signals Weaken As Jobless Claims Hold Near 4-Month Highs

210,000 Americans signed up for jobless benefits for the first-time last week, that is a slight drop from the prior week but remains near 4-month highs. Continuing claims unexpectedly rose in the prior week, up from 1.315mm to 1.346mm Americans…

Source: Bloomberg

Finally, as BofA notes that this is one of those cases were – within limits – bad news is good news, as The Fed faces the hottest labor market in modern history, creating very high wage inflation. That can only be solved with a dramatic slowdown in job growth and a rise in the unemployment rate.

It is hard to pinpoint the level of claims consistent with flat unemployment rate, but BofA thinks it needs to get well above 300k.

The silver lining for The Fed – which really isn’t – is that labor market signals have started to show weakness in recent months (but nothing like as bad as the housing market’s signals)…

As BofA notes, the lower the unemployment rate gets, the harder it is for the Fed to stop inflation without triggering a recession. That would not only bad for the overall economy, but is particularly bad for less advantaged parts of the population.