US weekly jobless claims fall as labor market remains tight

FILE PHOTO: Signage for a job fair is seen on 5th Avenue after the release of the jobs report in Manhattan, New York City, U.S. REUTERS/Andrew Kelly

WASHINGTON: The number of Americans filing new claims for unemployment benefits fell last week, pointing to a still tight labor 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. Economists polled by Reuters had forecast 240,000 claims for the latest week.

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 labor 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 July 25-26 meeting published on Wednesday showed that while policymakers acknowledged "signs that demand and supply were coming into better balance," they "judged that further progress toward a balancing of demand and supply in the labor market was needed, and they expected that additional softening in labor market conditions would take place over time."

The U.S. central bank has since March 2022 raised its benchmark overnight interest rate by 525 basis points to the current 5.25% to 5.50% 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.

Labor market resilience is underpinning the economy, by driving retail sales and homebuilding.

Economists have dialed 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 nonfarm 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 labor 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. - Reuters

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