The number of Americans filing for unemployment benefits fell to its lowest level in four months, reflecting renewed strength in the U.S. labor market.
According to the Labor Department, jobless claims fell 12,000 to 219,000 for the week ending September 14. Economists had expected claims to reach about 230,000, but the decline exceeded expectations.
These weekly claims, considered a key indicator of layoffs, have been slowly increasing since May. While still at historically healthy levels, the surge in claims over the summer raised concerns that high interest rates were starting to weigh on the labor market. However, the recent decline in claims suggests the labor market remains resilient for now.
Photo by Nam Y. Huh/AP Photo
In response to signs of a weakening labor market and slowing inflation, the Federal Reserve took action this week. On Wednesday, the central bank cut its benchmark interest rate by half a percentage point, the first rate cut in four years.
That marked a shift in focus for the Fed from fighting inflation to promoting job growth. The Fed has raised rates several times over the past two years, pushing the federal funds rate to a two-decade high of 5.3%.
“The focus has now shifted to the labor market and there is a sense that the Fed is trying to find a better balance between employment and inflation,” said Stephen Innes of SPI Asset Management. The Fed’s goal is to achieve a “soft landing,” meaning slowing inflation without triggering a recession.
Inflation has been falling steadily and moving closer to the Fed’s 2% target, leading Fed Chairman Jerome Powell to recently say that inflation is largely under control. That has given the central bank more flexibility to focus on stabilizing the labor market, which has shown signs of slowing in recent months.
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Earlier this year, unemployment claims averaged 213,000 per week between January and April, before climbing to 250,000 by the end of July. The surge in claims coincided with a slowdown in job creation, with U.S. employers adding just 142,000 jobs in August, after a low of 89,000 in July. That was well below the monthly average of nearly 218,000 jobs added from January through June.
The Labor Department also revised its employment data last month, revealing that the U.S. economy created 818,000 fewer jobs between April 2023 and March of this year than previously expected. The downward revision supports the view that the labor market is slowing.
Despite these challenges, the latest report offers some optimism. The four-week average of claims, which smooths out weekly volatility, fell 3,500 to 227,500. Additionally, the total number of Americans receiving unemployment benefits fell 14,000 to 1.83 million, the lowest level since early June.
This article includes reporting from The Associated Press
