US weekly jobless claims fall as labour market remains tight
THE number of Americans filing new claims for unemployment benefits fell last week, pointing to a still-tight labour market.
Initial claims for state unemployment benefits dropped 11,000 to a seasonally adjusted 239,000 for the week ended Aug 12, the Labor Department said on Thursday (Aug 17). Economists polled by Reuters had forecast 240,000 claims for the latest week.
The initial claims data can be particularly volatile in the summer months as automakers close for their annual retooling period. The four-week moving average, which smooths out some of that volatility, increased to 234,250.
Claims surged in the week ending Aug 5, with applications in Ohio accounting for a big chunk of the increase. The state has previously experienced fraudulent filings, leading most economists to shrug off the rise in claims.
Although the labour market is slowing, with job gains in July the second smallest since December 2020, conditions generally remain tight. The unemployment rate is at levels last seen more than 50 years ago. There were 1.6 job openings for every unemployed person in June.
Minutes of the Federal Reserve’s Jul 25-26 meeting published on Wednesday showed that policymakers acknowledged “signs that demand and supply were coming into better balance”.
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But they “judged that further progress toward a balancing of demand and supply in the labour market was needed, and they expected that additional softening in labour market conditions would take place over time”.
The US central bank has since March 2022 raised its benchmark overnight interest rate by 525 basis points to the current 5.25 per cent to 5.50 per cent range. Most economists believe the Fed’s fastest rate-hiking cycle in more than 40 years is likely over, given the recent moderation in inflation.
Labour market resilience is underpinning the economy, by driving retail sales and homebuilding. It continues to show strength despite the impact of higher borrowing costs on various sectors.
While some employers are starting to scale back hiring, many are hesitant to dismiss workers after having trouble attracting and retaining talent during the Covid-19 pandemic.
Economists have dialled back their forecasts for a recession this year, and are increasingly warming up to the idea that the Fed could guide the economy to a “soft landing.”
The claims data covered the period during which the government surveyed business establishments for the non-farm payrolls component of August’s employment report. Claims rose slightly between the July and August survey period.
Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will offer more clues on the health of the labour market in August.
The so-called continuing claims increased 32,000 to 1.716 million during the week ending Aug 5, the claims report showed. At current levels, continuing claims are still low by historical standards, indicating that some laid-off workers are experiencing short spells of unemployment.
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