Jobless Claims Jump, Offering Clues About Jobs Report and Future Fed Moves

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What's Happening Today

The number of people filing for unemployment for the first time is on the rise, jumping by 29,000 to 219,000 by the end of last week, according to the Labor Department. While private unemployment remained strong in September, according to data released by ADP yesterday, a rise in jobless claims could indicate that we might see unemployment tick upward in tomorrow's jobs report for September from the Labor Department.

Today's jobless claims numbers were higher than expected, and a big jump from the previous week's numbers, which had been the lowest since the spring. And that may be a clue about what the Federal Reserve does next.

If unemployment rises and the jobs report shows growing weakness in the labor market, there is a chance that the Fed could ease up on how aggressively it raises interest rates to fight inflation. Ahead of the jobs report, the big rally in the U.S. stock market earlier this week has fizzled.

You can expect volatility going forward in the markets as investors continue to look for clues as they weigh risks of a potential recession. So each piece of economic data could provide hope to fuel brief rallies—or fan the flames of discontent.

Investors will also be paying attention to speeches and comments from central bank policymakers for hints about how aggressive they plan to be at the next Fed meeting. Hawkish tones (meaning wanting to raise rates) will likely send markets lower, while dovish comments (easing rates) could soothe fears that the Fed is sending the U.S. economy into a recession.

- Kristin

Editors' Picks

Why the Federal Reserve Won't Be So Quick to Ease Up On Its Fight Against Inflation (CNBC)

Home Values Predicted To Fall 5.5% Next Year (The Balance)

Biden Weighs Options After OPEC+ Moves to Cut Oil Output (The Wall Street Journal)

Some Remote Workers are Doing Two Jobs at Once. They Say It's Fair. (The Washington Post)

Your 401(k) Is the Next Midterm Battleground for Republicans (Bloomberg)

Should You Contribute to a 401(k) Plan, and How Much? (The Balance)

How To Answer Interview Questions About Salary (The Balance)

Term of the Day

20/10 Rule of Thumb

The 20/10 rule of thumb is a budgeting guideline that limits consumer debt payments to no more than 20% of your annual take-home income and no more than 10% of your monthly take-home income.

This rule can help you decide whether you're spending too much on debt payments and limit the additional borrowing that you're willing to take on.

The 20/10 rule of thumb doesn't address how much you should spend in other categories, such as living expenses or saving for retirement. Instead, it looks only at how much debt you are carrying.

The 70/20/10 rule of thumb, by contrast, looks at a more complete financial picture by setting limits on your other spending as well.

Off the Charts

If you're on the job hunt, you might find that listings are a little less plentiful than they used to be. The ratio of vacancies to jobless workers fell to 1.7 in August, down from 2 in July, according to a release from the Labor Department earlier this week.

On Friday, Oct. 7 at 12 p.m. EST, join us on Instagram Live for a discussion with The Balance Editor-in-Chief Kristin Myers and Jannese Torres, founder of Yo Qiero Dinero, on building generational wealth in the Hispanic community. Follow us on Instagram to get updates on The Balance's live events this month!