U.S. Jobless Claims Drop as Labor Market Stays Resilient Amid High Interest Rates

U.S. Jobless Claims Drop as Labor Market Stays Resilient Amid High Interest Rates
Image By: Los Angeles Times

Despite rising interest rates, the number of Americans applying for unemployment benefits decreased somewhat last week, indicating the strength of the American labor market.

In the week ending August 24, jobless claims decreased by 2,000 to 231,000, according to a Labor Department report released on Thursday. That is slightly less than the 232,000 fresh filings analysts had projected.

Claims’ four-week average, which mitigates some of the volatility from week to week, decreased by 4,750 to 231,500.

The number of weekly applications for unemployment benefits, which are used as a stand-in for layoffs, is still low compared to historical levels. Though in the last few months, they have increased.

Weekly claims averaged a pitiful 213,000 from January to May. However, they began to rise in May and reached 250,000 in late July, providing more proof that high interest rates were ultimately bringing some coolness to an already scorching U.S. employment market.

Just 114,000 new jobs were added by employers in July, a far cry from the almost 218,000 monthly average of January through June. July saw an increase in the unemployment rate for the fourth consecutive month, but it is still quite low at 4.3%.

The Labor Department revealed last week that, contrary to initial estimates, the U.S. economy created 818,000 fewer jobs between April 2023 and March of this year. The updated figure confirms data indicating the labor market has been gradually contracting and probably strengthens the Federal Reserve’s decision to shortly begin reducing interest rates.

The Federal Reserve hiked its benchmark interest rate eleven times in 2022 and 2023 in an effort to curb inflation, which reached a four-decade high little over two years ago. It has been there for more than a year after reaching a 23-year high as a result.

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With inflation gradually declining and getting closer to the Federal Reserve’s 2% objective, Fed Chair Jerome Powell announced last week that the situation was mostly under control. At its next meeting in September, the Fed is expected by most analysts to start reducing interest rates.

For the week of August 17, the overall number of Americans receiving unemployment benefits increased by 13,000 to 1.87 million.

Reference

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With more than two years of expertise in news and analysis, Eileen Stewart is a seasoned reporter. Eileen is a respected voice in this field, well-known for her sharp reporting and insightful analysis. Her writing covers a wide range of subjects, from politics to culture and more.