Economy Might Be Slowing, Labor Market Loosening

Three more pieces of economic data released Thursday all suggested that U.S. economic growth is slowing and that the nation’s extremely tight labor markets, a keen concern of Federal Reserve officials, may be loosening up a bit.

With other recent figures also pointing to some slowing in what had been a very rapid rate of growth, Fed policymakers on Wednesday chose to leave the target for overnight interest rates unchanged at 6.5%. The Fed had raised rates six times in the last year to cool off the economy and keep inflation under control.

At a policymaking session May 16, when they raised their target by a half-percentage point, a key reason was “statistical and anecdotal indications of further tightening of labor resources, acceleration in some measures of labor compensation, and early signs of a possible upturn in underlying price inflation,” according to minutes of the meeting released Thursday.

But that may be changing, according to some of the figures released Thursday.

Perhaps the most important was the report from the Labor Department that initial claims for unemployment benefits filed by workers who lost a job rose last week to 306,000 from 304,000 the week before. That small increase was in itself almost insignificant, but it pushed the four-week average for new claims to 305,250, the highest level in almost a year.

At the same time, the Conference Board reported a drop in its index based on the volume of help-wanted advertising in 51 regional newspapers. The index fell 6 points to 83, the lowest reading since September.

Together, the reports “suggest that labor market conditions have loosened a bit,” said economist Jennifer Rossum of Stone & McCarthy, a financial markets research firm.

Because the weekly figures are very volatile, economists hesitate to read too much into them. However, the four-week average now appears to have hit a low of 262,750 two and a half months ago and has moved up by more than 40,000 since then.