US jobless claims fall by 7,000 to 227,000 in a sign of labor market resilience

WASHINGTON– The number of jobless claims in the US fell last week, another sign that the labor market remains robust despite high interest rates.

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

In the week ending August 3, 1.86 million Americans received unemployment benefits, 7,000 fewer than the previous week.

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

But the number of jobless claims has since fallen for two weeks in a row, allaying fears that the labor market situation is rapidly deteriorating rather than just weakening.

“Applications have calmed down and their recent increase appears to be just a blip rather than a fundamental change in the labor market,” said Robert Frick, economist at Navy Federal Credit Union.

The Federal Reserve, battling inflation that hit a four-year peak just over two years ago, raised its benchmark interest rate 11 times in 2022 and 2023, reaching a 23-year high. Inflation has been steadily declining – from 9.1% in June 2022 to a three-year low of 2.9% last month. Despite higher borrowing costs, the economy and hiring continued to run like clockwork, belying widespread fears that the United States could slide into recession.

The economic situation is weighing heavily on voters as they prepare for the November presidential election. Despite a solid job market and easing inflation, Americans are still angry that consumer prices are 19% higher than they were before inflation began in 2021. Many are blaming President Joe Biden, though it's unclear whether they will blame Vice President Kamala Harris as she runs for the presidency.

Lately, higher unemployment numbers seem to be finally taking their toll. Employers added just 114,000 new jobs in July, well below the January-June monthly average of nearly 218,000. The unemployment rate rose for the fourth consecutive month in July, but remains low at 4.3%. Job openings have been steadily declining since hitting a record high of 12.2 million in March 2022. In June, it fell to 8.2 million.

As signs of an economic slowdown mount and inflation continues to approach its two percent target, the Fed is expected to begin cutting interest rates at its next meeting in September.