Initial jobless claims ease market concerns again! What are investors more worried about now?

In the latest week, the number of initial jobless claims in the United States has increased slightly, indicating that the labor market is gradually cooling down.

Data released by the U.S. Department of Labor on Thursday showed that for the week ending August 17th, the number of initial jobless claims increased by 4,000 people, reaching 232,000 people after seasonal adjustments, slightly exceeding the expected 230,000 people.

The latest data is expected to continue easing concerns about the rapid deterioration of the labor market, which initially arose after a significant slowdown in non-farm employment numbers in July, with the unemployment rate in July also rising to a post-pandemic high of 4.3%.

Federal Reserve officials have stated that they are closely monitoring the labor market, as they realize that delaying rate cuts could cause serious damage.

However, layoffs are still at historically low levels, and the main reason for the slowdown in the labor market is that companies are reducing their hiring scale, contrasting with the surge in labor supply brought by immigrants.

The Federal Reserve has raised interest rates by a total of 525 basis points in 2022 and 2023, dampening demand.

The Federal Reserve has kept the benchmark overnight interest rate in the current range of 5.25%-5.50% for over a year, but it is now widely expected that the Fed will begin a rate-cutting cycle at its next policy meeting on September 17-18.

The report also shows that for the week ending August 10th, the number of continuing jobless claims increased by 4,000 people to 1.863 million. Chris Larkin of Morgan Stanley E*Trade said:

"Investors may overlook today's initial jobless claims and focus on next week's inflation data and Nvidia earnings. Concerns about an economic recession may have faded, but the market may still be more concerned about the economy cooling too much rather than heating up again."

Larkin stated that the latest initial jobless claims indicate that the labor market is slowing down but remains resilient, which should help the Fed start cutting rates in September.

Recent economic data will help Powell make the latest assessment of the labor market before delivering a speech at the central bank's annual meeting in Jackson Hole, Wyoming on Friday.

With inflation easing from its pandemic peak, Federal Reserve policymakers have recently shifted their focus to the labor market aspect of their dual mandate. Kansas City Fed President Schmid stated that he would like to see more economic data before supporting any decision to start cutting rates.

Sam Stovall of CFRA stated, "We believe that the Fed's next easing cycle will start in a more cautious manner, with a 25 basis point rate cut first. This approach may aim to show that the Fed is not behind the curve and allow it to ensure that the embers of inflation have been completely extinguished before concluding that its mission is accomplished."