WASHINGTON — The number of Americans applying for unemployment benefits fell last week, another sign that the job market remains resilient in the face of high interest rates.
Jobless claims dropped by 7,000 to 227,000 last week, the Labor Department reported Thursday. The four-week average of claims, which smooths out week-to-week ups and downs, fell by 4,500 to 236,500.
In the week that ended Aug. 3, 1.86 million Americans were collecting jobless benefits, down by 7,000 from the week before.
Weekly filings for unemployment benefits, which are a proxy for layoffs, remain low by historic standards. From January through May, claims averaged a rock-bottom 213,000 a week. But they started rising in May, hitting 250,000 in late July and adding to evidence that high interest rates are taking a toll on the U.S. job market.
But claims have since fallen two straight weeks, dispelling worries that the job market was deteriorating rapidly rather than just slowing.
“Claims calmed down and their recent rise appears to be just a blip, not a fundamental shift in the labor market,” said Robert Frick, economist at the Navy Federal Credit Union.
The Federal Reserve, fighting inflation that hit a four-decade just over two years ago, raised its benchmark interest rate 11 times in 2022 and 2023, taking it to a 23-year high. Inflation has come down steadily — from 9.1% in June 2022 to a three-year low of 2.9% last month. Despite higher borrowing costs, the economy and hiring kept cruising along, defying widespread fears that the United States would sink into recession.
The economy is weighing heavily on voters as they prepare for November’s presidential election. Despite a solid job market and decelerating inflation, Americans are still exasperated that consumer prices are 19% higher than they were before inflation started to take off in 2021. Many blame President Joe Biden, though it’s unclear whether they will hold Vice President Kamala Harris responsible as she seeks the presidency.
Lately, higher rates have finally seemed to be taking a toll. Employers added just 114,000 jobs in July, well below the January-June monthly average of nearly 218,000. The unemployment rate rose for the fourth straight month in July, though it remains low at 4.3%. Monthly job openings have fallen steadily since peaking at a record 12.2 million in March 2022. They were down to 8.2 million in June.
As signs of an economic slowdown accumulate and inflation continues to drift down toward its 2% target, the Fed is expected to start cutting rates at its next meeting in September.
The latest data on US unemployment claims has shown a promising sign of resiliency in the job market, as the number of initial claims dropped by 7,000 to 227,000. This decrease comes as a welcome relief after several weeks of fluctuating numbers, indicating a potential stabilization in the labor market.
The decline in unemployment claims is a positive indicator of the overall health of the economy, as it suggests that fewer people are losing their jobs and more individuals are finding employment opportunities. This trend is particularly encouraging given the ongoing challenges posed by the COVID-19 pandemic and its impact on businesses and workers across the country.
One possible explanation for the drop in unemployment claims could be attributed to the gradual reopening of businesses and the easing of restrictions in many states. As more companies resume operations and consumer demand picks up, employers may be more inclined to retain their current workforce or even hire new employees to meet growing needs.
Additionally, the rollout of vaccines and the continued efforts to contain the spread of the virus have also contributed to a sense of optimism in the job market. With more people getting vaccinated and restrictions being lifted, there is a growing sense of confidence among both employers and job seekers, leading to increased hiring activity and a reduction in layoffs.
While the decrease in unemployment claims is certainly a positive development, it is important to note that there are still challenges ahead for the labor market. Many industries continue to struggle, particularly those in the hospitality, travel, and entertainment sectors, which have been hit hard by the pandemic.
Furthermore, the long-term impact of the pandemic on the economy remains uncertain, and there are still millions of Americans who are out of work or underemployed. As such, policymakers and business leaders must continue to prioritize efforts to support workers and businesses as they navigate the recovery process.
Overall, the recent drop in US unemployment claims is a promising sign of resiliency in the job market, but it is essential to remain vigilant and proactive in addressing the ongoing challenges facing the economy. By working together to support workers, businesses, and communities, we can help ensure a strong and sustainable recovery for all.
