Global Market: Wall Street in focus as US jobless claims ease amid Fed rate uncertainty

The number of Americans filing new claims for unemployment benefits fell last week, signalling labour market stability despite sluggish hiring and keeping the Federal Reserve’s interest-rate outlook in focus.

Initial claims declined by 2,000 to a seasonally adjusted 197,000 in the week ended October 3, below economists’ expectations of 200,000, the US Labor Department said on Thursday. The four-week moving average fell to 198,000, its lowest level since early October 2022.

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Claims have remained below 200,000 since mid-September, indicating historically low layoffs. However, employers remain reluctant to hire, with US nonfarm payrolls increasing by just 29,000 in September.

Continuing claims, a proxy for the number of people receiving ongoing unemployment benefits, rose by 17,000 to 1.716 million in the week ended September 26. The median duration of unemployment stood at 11.5 weeks in September, near a four-and-a-half-year high.

The data point to a low-hiring, low-firing labour market, with workers facing greater difficulty finding new jobs despite limited layoffs, Reuters reported.

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Fed rate outlook in focus
The resilient labour market could complicate the Federal Reserve’s policy decisions as it balances employment conditions against inflation. The central bank raised its benchmark interest rate by 25 basis points last month to 3.75%-4.00%, its first hike in three years.

However, weak payroll growth and cooler inflation readings have reduced expectations of another rate increase this month. Economists expect the Fed to raise rates again in December.

Stock market impact
The data send mixed signals for US equities. Low layoffs indicate economic resilience and could support corporate earnings, but persistent labour market strength may reinforce expectations of higher interest rates for longer.

Higher Treasury yields and renewed concerns about Fed tightening could weigh on technology and other rate-sensitive stocks. Meanwhile, signs of weakening hiring could raise concerns about consumer spending and earnings growth.

Investors will assess upcoming inflation and employment data to gauge the Fed’s next move. The key question is whether labour market stability will support economic growth or keep interest rates elevated for longer, limiting gains in equities.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times.)