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US jobless claims have risen to their highest level in nearly four years, adding to fears for the health of the world’s biggest economy amid Donald Trump’s tariff war.
Official figures showed the number of Americans filing for unemployment benefits rose by 27,000 to 263,000 last week, the most since October 2021. The data will add to the pressure on US Federal Reserve chief Jerome Powell to cut interest rates next month.
That is despite separate figures yesterday showing a rebound in US inflation in August to 2.9 per cent – the highest level since January.
Signs that the economy is weakening will raise fears of stagflation, where prices spiral even as growth stagnates. Yet Wall Street stock indices rallied towards record highs yesterday as investors cheered the prospect of rate cuts. US ten-year bond yields fell below 4 per cent for the first time since turmoil in April, spurred by Trump’s tariffs.
Financial markets have priced in a quarter-point central bank interest rate cut next Wednesday with two more by the end of the year. Trump has labelled Powell a ‘numbskull’ for not cutting rates faster. Susannah Streeter, at Hargreaves Lansdown, said: ‘The weakening labour market is a warning light. However, right now, investors are taking a glass-half-full approach, enthused by the prospect of lower borrowing costs.’
James Knightley, of ING Bank, said: ‘The weakening of the jobs market is now the Fed’s priority, with rising jobless claims hinting at a pick-up in lay-offs at a time when hiring is subdued.’ The US government this week revealed job numbers could have been overstated by 911,000 in the year to March.
Revised figures for the summer showed employment fell in June by 13,000. Chris Beauchamp, at IG, said of rate cut prospects: ‘Perhaps Powell will be privately glad that he has such cover, since it helps allay concerns that the Fed has buckled under White House pressure.’
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