- Weekly jobless claims fall 4,000 to 217,000
- Continuing claims increase 4,000 to 1.955 million
WASHINGTON, July 24 (Reuters) - The number of Americans filing new applications for jobless benefits fell to a three-month low last week, pointing to stable labor market conditions, though sluggish hiring is making it harder for many laid-off workers to land new opportunities.
The lack of material labor market deterioration likely gives the Federal Reserve cover to keep interest unchanged next week amid signs that President Donald Trump's aggressive tariffs on imports were starting to lift inflation. Trump is pressuring the U.S. central bank to resume its interest rate cuts.
"At the moment, the labor market is holding up with financial markets holding their breath," said Christopher Rupkey, chief economist at FWDBONDS. "The weekly jobless claims give Fed officials no cover whatsoever if they are seriously thinking of cutting interest rates at next week's meeting."
Initial claims for state unemployment benefits dropped 4,000 to a seasonally adjusted 217,000 for the week ended July 19, the lowest level since April, the Labor Department said on Thursday.
Economists polled by Reuters had forecast 226,000 claims for the latest week. Claims have declined for six straight weeks and have pulled further away from an eight-month high touched in June. Unadjusted claims decreased by 45,319 to 215,792 last week.
Claims in New York state declined 12,303, more than reversing the prior week's jump, which was attributed to layoffs in the transportation and warehousing, public administration and construction industries. There were also sizeable decreases in filings in California, Michigan and Pennsylvania.
But applications shot up by 4,902 in Kentucky, likely related to the annual closure of motor vehicle assembly plants for maintenance and retooling for new models.
Though there have been some layoffs, employers have been mostly reluctant to lay off workers, opting instead to scale back on hiring while awaiting more clarity on the Trump administration's protectionist trade policy.
TEPID HIRING
There is still a chance that claims could push higher. Claims have tended to increase in July, in part due to the temporary motor vehicle assembly plant shutdowns, whose varied timing can throw off the model the government uses to strip out seasonal fluctuations from the data.
Though job growth has slowed from last year, the labor market remains stable. Economists expect the Fed will keep its benchmark interest rate in the 4.25%-4.50% range after the end of a two-day policy meeting next Wednesday. The Fed cut rates three times in 2024, with the last move coming in December.
Nonetheless, the hesitancy by businesses to boost hiring has left many of those who are out of work to experience long spells of unemployment. The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 4,000 to a seasonally adjusted 1.955 million during the week ending July 12, the claims report showed.
The so-called continuing claims covered the period during which the government surveyed households for July's unemployment rate. Continuing claims eased slightly between the June and July survey weeks.
"The good news is that the measure has leveled off since the end of May," said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. "The bad news is that the 1.955 million level is 50,000 to 75,000 higher than the prevailing range in late 2024 and early this year."
While economists said the elevated continuing claims reading posed an upside risk to the unemployment rate, they mostly expected it to hold steady at 4.1% this month.
A decline in labor supply amid reduced flows of immigrants means the economy now only needs to create roughly 100,000 or fewer jobs per month to keep up with growth in the working-age population.
The drop in the unemployment rate in June after holding at 4.2% for three straight months was mostly because people dropped out of the labor force.
"Looking ahead, we expect the gradual slowdown in immigration to bring the breakeven rate, the rate of payroll job growth needed to keep the unemployment rate stable, down to 70,000 per month by the end of 2025 from our 90,000 estimate of the current pace," Elsie Peng, an economist at Goldman Sachs, said in a note.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao
Source: Reuters