The number of Americans applying for unemployment benefits fell by 7,000 to 227,000 last week, according to the Labor Department. This drop in jobless claims is another sign that the job market remains resilient despite high interest rates. The four-week average of claims, which smooths out weekly fluctuations, also fell by 4,500 to 236,500.
In the week that ended Aug. 3, 1.86 million Americans were collecting jobless benefits, a decrease of 7,000 from the previous week. Weekly filings for unemployment benefits, which serve as a proxy for layoffs, remain low by historical standards.
From January through May, claims averaged a mere 213,000 per week. They began to rise in May, reaching 250,000 in late July, contributing to concerns that high interest rates were negatively impacting the U.S. job market. However, claims have since fallen for two consecutive weeks, alleviating fears of a rapidly deteriorating job market.
Robert Frick, an economist at the Navy Federal Credit Union, stated, “Claims calmed down and their recent rise appears to be just a blip, not a fundamental shift in the labor market.”
The Federal Reserve has been fighting inflation, which hit a four-decade high just over two years ago.
Unemployment claims fall amid economic shifts
In response, the Fed raised its benchmark interest rate 11 times in 2022 and 2023, taking it to a 23-year high.
Despite higher borrowing costs, the economy and hiring have remained robust, defying widespread fears of a recession. Inflation has been steadily decreasing, from 9.1% in June 2022 to a three-year low of 2.9% last month. However, the economy remains a significant concern for voters as they prepare for the November presidential election.
Americans are still frustrated that consumer prices are 19% higher than they were before inflation began rising in 2021, with many blaming President Joe Biden. It remains unclear whether this will impact Vice President Kamala Harris as she seeks the presidency. Recently, higher interest rates appear to be having an effect on the job market.
Employers added just 114,000 jobs in July, well below the January-June monthly average of nearly 218,000. The unemployment rate has risen for the fourth straight month in July but remains low at 4.3%. Monthly job openings have also been falling steadily since peaking at a record 12.2 million in March 2022, down to 8.2 million in June.
As signs of an economic slowdown accumulate and inflation continues to drift toward its 2% target, the Fed is expected to start cutting rates at its next meeting in September.
