Weekly Jobless Claims Drop to Lowest Level in Two Months
WASHINGTON, July 20 – In a surprise turn of events, the number of Americans filing new claims for unemployment benefits decreased last week, reaching the lowest level in two months. This unexpected decline comes amidst ongoing labor market tightness and despite efforts by the Federal Reserve to slow demand.
According to the Labor Department, initial claims for state unemployment benefits dropped by 9,000 to a seasonally adjusted 228,000 for the week ended July 15. This is the lowest level since mid-May and is lower than the forecasted 242,000 claims by economists polled by Reuters.
“The claims data show that the labor market remains resilient and businesses have yet to start shedding workers at a rapid pace, despite five percentage points of tightening,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.
While the labor market remains tight, experts believe that last week’s drop in claims may have been exaggerated due to difficulties in adjusting the data for seasonal patterns. As automakers typically idle plants in July for retooling, these temporary closures can throw off the model that the government uses to account for seasonal fluctuations in the data.
However, relative to the size of the labor market, claims remain well below the 280,000 threshold that economists say would signal a significant slowdown in job growth.
The overall labor market continues to be tight, with companies holding on to workers after struggling to find labor during the COVID-19 pandemic, despite the economy slowing down amidst the Federal Reserve’s interest rate increases.
The Federal Reserve, which has raised its policy rate by 500 basis points since March 2022, is expected to resume hiking rates next month after skipping an increase in June.
The claims data covered the week when the government surveyed businesses for the nonfarm payrolls component of July’s employment report. It is worth noting that claims fell during the June and July survey weeks. In June, the economy added 209,000 jobs.
Furthermore, the number of people receiving benefits after an initial week of aid, which serves as a proxy for hiring, increased by 33,000 to 1.754 million during the week ending July 8, as shown by the claims report.
Despite this increase, continuing claims, at current levels, are considered low by historical standards, suggesting that laid-off workers are finding new employment opportunities quickly.
These developments indicate that the labor market is holding up well, even in the face of ongoing challenges. However, economists and experts will be closely monitoring future data to assess the impact of the Federal Reserve’s policies and the overall health of the job market.
Reporting by Lucia Mutikani; Editing by Andrea Ricci and Paul Simao