The number of Americans filing new applications for unemployment benefits fell last week — surprising economists and boosting hopes that the Federal Reserve will finally start cutting interest rates next month.
The Labor Department said initial claims for state unemployment benefits dropped to a seasonally adjusted 227,000 for the week ended Aug. 10, missing economists’ predictions of 235,000, according to a Reuters poll.
Thursday’s report marks the fourth month in a row during which the jobless rate has grown due to an influx of immigrants seeking jobs in the US — driving up the labor supply while hiring remains stunted.
Thursday’s news comes a day after the federal government said inflation rose 2.9% last month versus a year ago — the first time price increases have fallen below 3% since 2021.
Now, some economists suspect the Fed may turn its attention to the labor market as its new indicator for rate cuts.
“These [job] payroll numbers are really where the action is going to be over the next couple of months,” Citi global economist Nathan Sheets told Yahoo Finance. “That’s where the Fed is going to be focusing by far the most of its attention.”
Thursday’s numbers follow a particularly weak July jobs report earlier this month — including an unemployment rate of 4.3%, representing a three-year high — that caused investors to panic.
The latter, combined with the Fed’s announcement a few days prior that it would be maintaining interest rates stoked fears of a crash, shaking the market and causing a steep sell-off.
The Fed’s 525 basis points worth of hikes through 2022 and 2023 — a response to steep pandemic-induced inflation — have caused companies to cut back on hiring efforts.
Layoffs remain relatively low, though big names in the tech and media industries — including Google parent Alphabet, Amazon, Tesla, Paramount, Sports Illustrated and The Los Angeles Times — have cut jobs throughout the year.
The Fed has maintained its interest rate in the 5.25% to 5.50% range for a year now, with Chair Jerome Powell reaffirming in July the Fed’s goal of reaching a 2% inflation rate before issuing cuts.
The number of Americans continuing to receive benefits after an initial week of aid fell 7,000 in the week ended Aug. 3 to a seasonally adjusted 1.864 million, the jobless claims report said.
The amount of workers receiving benefits for extended periods of time nears levels seen in 2021, remaining high as Americans experience more difficulty finding jobs due to an excess of labor supply.
With Post wires
