The number of new unemployment claims climbed again last week, hitting a 10-month high of 242,000.

It’s another sign of what Federal Reserve Chair Jerome Powell characterized as a “gradually cooling” labor market. “We watch the labor market … very carefully, and that’s what we see,” he said Wednesday, after Fed policymakers kept interest rates level. “We see gradual cooling, gradual moving toward better balance.”

It’s been a year of transformation for the job market. Just 12 months ago, it was stubbornly tight, said Luke Pardue. He’s policy director at the Aspen Institute’s economic strategy group.

“Employers were really hesitant to let go of workers, and workers were confident that they could leave their job and find another one,” he said.

Now? “Jobless claims are at a 10-month high, the unemployment rate right now is the highest since 2022. And job openings are near their three-year low,” he said.

But in today’s upside-down economy, an increase in unemployment is also kind of good news. 

“It’s sort of sacrificing a little bit of that short-term gain for much more sustainable growth over the long term,” Pardue said.

A cooling, more balanced job market with lower inflation means interest rates might finally go down, said Tuan Nguyen, an economist with consulting firm RSM.

“So far, we have had two months of good inflation data. And if that continues, we think the Fed will most likely cut in September,” he said.

Great for the stock market. But what about people who are already struggling to find work?

Michele Evermore, a senior fellow with the Century Foundation, said she’s especially worried about young workers and recent grads. 

“Somebody without work history is maybe a little bit of a gamble. Employers may not be taking risks on new grads,” she said.

Indeed, employers are being more selective about hiring these days, said Megan Slabinski with staffing firm Robert Half. They’re willing to wait it out to find the right talent. 

“Anything around [artificial intelligence], machine learning, data analytics is in high demand, and there’s a scarcity of talent available,” she said.

Even in a cooling labor market, workers with certain skills are still hot.