U.S. weekly jobless claims drop as labor market remains resilient
The number of Americans filing new claims for unemployment benefits fell last week and data for the prior period was revised sharply down, suggesting labor market conditions remain tight, though higher interest rates are slowing momentum.
The weekly unemployment claims report from the Labor Department on Thursday added to strong industrial production in July and underlying retail sales growth allaying fears that the economy was in recession. The claims report, the most timely data on the economy’s health, could give the Federal Reserve ammunition to deliver another hefty rate hike next month.
“Fears of broad-based layoffs have yet to materialize,” said Mahir Rasheed, a U.S. economist at Oxford Economics in New York. “Still, we doubt claims will accelerate sharply as labor demand remains well ahead of labor supply, while the outlook for the economy remains relatively positive despite elevated uncertainty regarding inflation and growth.”
Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 250,000 for the week ended Aug. 13. Data for the prior week was revised to show 10,000 fewer claims filed than previously reported. Economists polled by Reuters had forecast 265,000 applications for the latest week.
The hefty revision and last week’s modest decline pulled claims well below the 270,000-300,000 range that economists say would signal a material slowdown in the labor market.
Unadjusted claims fell from 4,536 to 191,834 last week. A surge in applications in Massachusetts was offset by notable declines in California, Ohio, Texas, and Georgia.
Companies in the interest rate-sensitive housing and technology industries have been laying off workers in response to slowing demand caused by the Fed’s aggressive monetary policy tightening campaign to tame inflation. But elsewhere, businesses are hungry for workers. There were 10.7 million job openings at the end of June, with 1.8 openings for every unemployed worker.
The U.S. central bank is expected to raise its policy rate by between 50 and 75 basis points next month. The Fed has raised this rate by 225 basis points since March.
Minutes of the July 26-27 policy meeting published on Wednesday showed that though Fed officials “observed that the labor market remained strong,” many also noted “there were some tentative signs of a softening outlook for the labor market.”
“The coast is clear for Fed officials to keep on pushing on interest rates to slow the economy because the earliest indicators showing distress in the labor market are not definitive on whether a recession is weeks away or months away or even coming at all,” said Christopher Rupkey, chief economist at FWDBONDS in New York.
Last week’s claims data covered the period during which the government surveyed businesses for the nonfarm payrolls portion of August’s employment report. Claims fell between the July and August survey periods. The economy created 528,000 jobs in July.
Data next week on the number of people receiving benefits after an initial week of aid will shed more light on job growth prospects for August.
The so-called continuing claims, a proxy for hiring, increased from 7,000 to 1.437 million in the week ending Aug. 6.
