The number of Americans applying for unemployment benefits has dropped to its lowest level in four months, signaling renewed strength in the U.S. labor market.
According to the Labor Department, jobless claims fell by 12,000 to 219,000 for the week ending Sept. 14. Economists had expected claims to reach around 230,000, but the decline surpassed forecasts.
These weekly filings, which are viewed as a key indicator of layoffs, had been slowly increasing since May. While still at historically healthy levels, the uptick in claims over the summer raised concerns that high interest rates were starting to weigh on the job market. However, the recent drop in claims suggests the labor market remains resilient for now.
A hiring sign is displayed at a retail store in Buffalo Grove, Ill., Friday, Sept. 6, 2024. On Thursday the Labor Department reported that the number of Americans applying for unemployment benefits fell to their lowest level in four months last week.
Nam Y. Huh/AP Photo
In response to signs of a weakening job market and easing inflation, the Federal Reserve took action this week. On Wednesday, the central bank cut its benchmark interest rate by half a percentage point, the first rate cut in four years.
This marked a shift in focus for the Fed, as it transitions from fighting inflation to supporting job growth. The Fed has raised rates multiple times over the past two years, pushing the federal funds rate to a two-decade high of 5.3%.
“The focus has now decisively shifted to the labor market, and there’s a sense that the Fed is trying to strike a better balance between jobs and inflation,” said Stephen Innes of SPI Asset Management. The Fed’s goal is to achieve a “soft landing,” where it slows inflation without triggering a recession.
Inflation has been steadily declining and is nearing the Fed’s target of 2%, leading Fed Chair Jerome Powell to recently say that inflation is largely under control. This has given the central bank more flexibility to focus on stabilizing the labor market, which has shown signs of cooling in recent months.
Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the Federal Reserve in Washington, Wednesday, Sept. 18, 2024. The central bank made cuts after holding interest rates at two-decade high in a bid to cool inflation.
Ben Curtis/AP Photo
Earlier this year, jobless claims averaged just 213,000 per week between January and April before increasing to 250,000 by late July. This rise in claims coincided with a slowdown in job creation, as U.S. employers added only 142,000 jobs in August, following a weak 89,000 in July. These figures are significantly lower than the monthly average of nearly 218,000 jobs added from January to June.
The Labor Department also revised its previous job data last month, revealing that the U.S. economy added 818,000 fewer jobs from April 2023 through March of this year than originally reported. This downward revision supports the idea that the job market has been slowing.
Despite these challenges, the latest report offers some optimism. The four-week average of claims, which smooths out weekly volatility, dropped by 3,500 to 227,500. Additionally, the total number of Americans receiving unemployment benefits fell by 14,000 to 1.83 million, the lowest level since early June.
This article includes reporting from The Associated Press
