The number of Americans applying for unemployment benefits last week fell to the lowest level in seven months with the labor market seemingly resistant to the higher interest rates put in to place to cool hiring.
U.S. applications for jobless claims fell by 13,000 to 216,000 for the week ending Sept. 2, the Labor Department reported Thursday. That’s the lowest level since February.
Jobless claim applications are seen as representative of the number of layoffs in a given week.
The Federal Reserve’s Battle Against Inflation
The Federal Reserve, well into the second year of its battle against inflation, has raised interest rates 11 times to 5.4%, the highest level in 22 years.
The Fed’s rate hikes are intended to cool the job market and bring down wages, which many economists believe suppresses price growth. Though some measures of inflation have come down significantly — from as much as 9% down closer to 3% — since the Fed starting raising interest rates, the job market has held up better than many expected.
Signs of a Healthy Labor Market
Last week, the government reported that U.S. employers added 187,000 jobs in August, another sign of a healthy labor market. The unemployment rate ticked up to 3.8%, still low by historical measures.
The U.S. economy has been adding an average of about 236,000 jobs per month this year, down from the pandemic surge of the previous two years, but still a strong number.
Recent government data also showed that job openings dropped to 8.8 million in July, the fewest since March 2021 and down from 9.2 million in June. However, the numbers remain unusually robust considering monthly job openings never topped 8 million before 2021.
Businesses Struggle to Replenish Workforces
Besides some layoffs in the technology sector early this year, companies have mostly been trying to retain workers.
Many businesses struggled to replenish their workforces after cutting jobs during the pandemic, and sizable amount of the ongoing hiring likely reflects efforts by firms to catch up to elevated levels of consumer demand that emerged since the pandemic recession.
While the manufacturing, warehousing, and retail industries have slowed their hiring in recent months, they aren’t yet cutting jobs in large numbers.
Overall, 1.68 million people were collecting unemployment benefits the week that ended August 26, about 40,000 fewer than the previous week. That number hasn’t been lower since a stretch in early January.
The four-week moving average of claims, which smooths out some of the week-to-week volatility, fell by 8,500 to 229,250.