Why the strong job market may be a bad thing for the economy


The number of Americans applying for unemployment benefits has decreased since last week, now hovering at a historic low, Bloomberg reports. This comes at a time when job openings in the U.S. rose to 10.7 million in September, and there was also an increase in wages and sector job growth, all of which were expected to fall, CNN reports.
However, this strong job market may not be all good news. Federal Reserve Chair Jerome Powell called the jobs market "overheated" and took measures to cool it by raising interest rates another 0.75 percent. The demand for workers is far exceeding supply with 1.9 jobs available for every person who wants to work, CNN continues. As a result, employers pay higher wages to hold onto workers, which in turn drives up inflation. "Reducing inflation is likely to require a sustained period of below-trend growth and softening of labor market conditions," Powell said Wednesday.
While initial unemployment claims decreased by 1,000 last week, ongoing claims increased to 1.49 million, the highest since March. This is a sign that Americans are remaining unemployed for longer. Also while job openings increased, the number of people actually hired slipped to the lowest level in 15 months, indicating that employers are not eager to hire. A separate report also indicated that layoffs are rising with job-cut announcements increasing by over 48 percent in October.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
The Bureau of Labor Statistics is releasing its jobs report on Friday where experts expect 200,000 added jobs last month as well as a slight increase in unemployment from 3.5 percent to 3.6 percent.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Devika Rao has worked as a staff writer at The Week since 2022, covering science, the environment, climate and business. She previously worked as a policy associate for a nonprofit organization advocating for environmental action from a business perspective.
-
What does 'conquering' Gaza mean to Israel?
Today's Big Question Benjamin Netanyahu's cabinet has approved a plan to displace much of the Palestinian population while seizing and occupying the territory on a long-term basis.
-
Casey Means: the controversial 'wellness influencer' nominated for surgeon general
In the Spotlight Means has drawn controversy for her closeness to RFK Jr.
-
Trump taps Fox News' Pirro for DC attorney post
speed read The president has named Fox News host Jeanine Pirro to be the top federal prosecutor for Washington, replacing acting US Attorney Ed Martin
-
Warren Buffet announces surprise retirement
speed read At the annual meeting of Berkshire Hathaway, the billionaire investor named Vice Chairman Greg Abel his replacement
-
Trump calls Amazon's Bezos over tariff display
Speed Read The president was not happy with reports that Amazon would list the added cost from tariffs alongside product prices
-
How will Wall Street react to the Trump-Powell showdown?
Today's Big Question 'Market turmoil' seems likely
-
Markets notch worst quarter in years as new tariffs loom
Speed Read The S&P 500 is on track for its worst month since 2022 as investors brace for Trump's tariffs
-
Tesla Cybertrucks recalled over dislodging panels
Speed Read Almost every Cybertruck in the US has been recalled over a stainless steel panel that could fall off
-
How will the Fed manage Trump's economy?
Today's Big Question Jerome Powell is 'in a bind'
-
Crafting emporium Joann is going out of business
Speed Read The 82-year-old fabric and crafts store will be closing all 800 of its stores
-
Why is the threat of stagflation rising?
Talking Points Inflation is sticky. Trump's tariffs won't help.