Americans are staring down the barrel of increased unemployment for 2024, but Thursday's jobless claims data indicates that train may have already left the station.
Unemployment in the U.S. is expected to increase from a current rate of 3.6 percent to 4.1 percent in 2024, the Organisation of Economic Co-Operation and Development (OECD) said in its economic outlook released this week.
Thursday's jobless claims indicate that America's job market is already experiencing some tightening with initial jobless claims up 7,000 to 218,000 for the week ending November 25, according to the U.S. Labor Department. This is the highest level since November 2021.
"The continuing claims figures continue to rise at a faster pace suggesting a deeper moderation in the labor market," Quincy Krosby, chief economist with LPL Financial, shared with Newsweek. "[This] is certainly welcome news for the Fed as it precludes a slowdown in consumer spending as consumers worry about the health of the overall labor market and the ability to find jobs."
OECD's report suggests that the U.S. will not be immune to the downturn as the global economy reels from the long-term effects of inflation. The organization predicts a steady climb in U.S. unemployment rates over the next two years, a departure from the historically low figures seen pre-pandemic.
OECD's prognosis is mirrored by the Federal Reserve Economic Data's (FRED) latest findings, which indicate that continued unemployment claims have reached their highest level in two years. The uptick is a reminder that the Federal Reserve's interest rate hikes, which were partly aimed at softening the labor market's robustness, is working. As initial and continued jobless claims rise, workers find it increasingly challenging to secure new employment.
The FRED report comes at a time when the Fed has paused its aggressive rate hikes, a response to inflation rates that, while cooling, remain above the central bank's target of 2 percent.
Recent factory slowdowns and the continued downturn in the housing market is "translating to a durable softening in the labor market," Bloomberg economists said. With higher borrowing costs dampening consumer and business spending, a more cautious approach to spending is expected as the year ends.
Fannie Mae also chimed in with a forecast, expecting home sales to "bottom out" early in the coming year, a sign of the broader economic challenges that may lead to reduced consumer spending and job cuts.
Analysts Newsweek spoke with are watching closely as the labor market approaches a potential inflection point. Should the OECD's predictions come to fruition, the U.S. could see a gradual increase in unemployment rates, testing the resilience of an economy that has thus far proven robust.
The convergence of OECD projections and FRED data points to an upcoming year where Americans may need to brace for a less certain employment landscape, analysts say. With unemployment rates forecasted to rise, the narrative of a full-throttle economy may need recalibration.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Aj Fabino is a Newsweek reporter based in Chicago. His focus is reporting on Economy & Finance. Aj joined Newsweek ... Read more
