U.S. jobless claims fall 7,000 to 227,000, a sign of labor market resilience

WASHINGTON — The number of Americans filing for unemployment benefits fell last week, another sign that the labor market remains resilient in the face of high interest rates.

Jobless claims fell 7,000 to 227,000 last week, the Labor Department said Thursday. The four-week average of claims, which smooths out weekly fluctuations, fell 4,500 to 236,500.

In the week ending August 3, 1.86 million Americans were receiving unemployment benefits, down 7,000 from the previous week.

Weekly jobless claims, a proxy for layoffs, remain low by historical standards. From January through May, claims averaged 213,000 per week. But they began to rise in May, reaching 250,000 by the end of July, further evidence that high interest rates are weighing on the U.S. labor market.

But jobless claims have since fallen for two straight weeks, allaying concerns that the job market was deteriorating rapidly rather than simply slowing.

“Unemployment claims have subsided and their recent increase appears to be a blip, not a fundamental change in the labor market,” said Robert Frick, an economist at Navy Federal Credit Union.

The Federal Reserve, battling inflation that hit a four-decade high just over two years ago, has raised its benchmark interest rate 11 times in 2022 and 2023, taking it to its highest level in 23 years. Inflation has fallen steadily, from 9.1% in June 2022 to 2.9% last month, its lowest level in three years. Despite higher borrowing costs, the economy and hiring have continued to grow, defying widespread fears of a U.S. recession.

The economy is weighing heavily on voters heading into the November presidential election. Despite a strong jobs market and falling inflation, Americans are still frustrated that consumer prices are 19% higher than they were before inflation began in 2021. Many blame President Joe Biden, though it’s unclear whether they’ll blame Vice President Kamala Harris, who is running for president.

Lately, rising employment rates finally appear to be having an impact. Employers added just 114,000 jobs in July, well below the January-June monthly average of nearly 218,000. The unemployment rate rose for the fourth straight month in July, though it remains low at 4.3%. Monthly job openings have been falling since hitting a record high of 12.2 million in March 2022. They had fallen to 8.2 million in June.

As signs of economic slowdown mount and inflation continues to decline toward its 2% target, the Fed is expected to begin cutting rates at its next meeting in September.

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