Jobless claims hit a five-month low despite the Fed’s efforts to slow the labor market

Initial jobless claims fell last week to the lowest level in five months, a sign that the labor market is strengthening even as the Federal Reserve tries to slow things down.

Jobless claims for the week ended Sept. 24 totaled 193,000, down 16,000 from the previous week’s downwardly revised total and below the Dow Jones estimate of 215,000, according to Ministry of Labor report Thursday.

The drop in claims was the lowest since April 23 and the first time claims fell below 200,000 since early May.

Continuing claims, which are one week late, fell by 29,000 to 1.347 million.

Strong job numbers come in between The Fed is trying to cool the economy and reduce inflation, which is nearing the highest levels since the early 1980s. Central bank officials have specifically pointed to a tight labor market and upward pressure on wages as a target for policy tightening.

Stocks fell after the report, while bond yields were higher.

“The recent decline in layoffs is at odds with the Fed’s efforts to ease labor market conditions and reduce inflation downward toward its 2 percent target,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “Capital markets listened to the Fed and investors are feeling the pain. But the labor market? For now at least, it’s not listening.”

There was more bad news Thursday for the Fed on the inflation front.

The personal consumption expenditures price index, a favorite gauge of inflation for the Fed, showed a 7.3% year-over-year price increase in the second quarter. the commerce ministry said in the final estimate of GDP for the period. That was up from the 7.1% reading in the two previous second-quarter estimates and just down from the 7.5% gain in the first quarter.

Excluding food and energy, core PCE inflation was 4.7%, 0.3 percentage points higher than the two previous estimates, but below the 5.6% jump in the first quarter.

The Fed has raised interest rates five times in 2022 by a total of 3 percentage points, and officials have stressed the importance of continuing to hike until inflation approaches the central bank’s 2% target.

“We have to do what we have to do to get back to price stability because we can’t have a healthy economy, we can’t have good labor markets over time unless we get back to price stability,” he said. Cleveland Fed President Loretta. Mester told CNBC “Squawk Box“In an interview on Thursday morning.

However, the Cleveland Fed itself Nowcasting inflation meter showing little improvement on the inflation front in September, even with a sharp drop in gas prices. The gauge indicated an 8.2% increase in the headline consumer price index and a 6.6% increase in core prices, compared with August’s 8.3% and 6.3% readings.

The BEA’s final estimate for second-quarter GDP was a 0.6% decline, unchanged from the previous estimate. This was the second consecutive quarter of negative GDP, meeting a commonly accepted definition of a recession.

Correction: The final estimate for second-quarter GDP was a 0.6% decline, unchanged from the previous estimate. An earlier version misstated its status.