The number of Americans filing new applications for jobless benefits slipped last week, but re-employment opportunities for laid-off workers are becoming more scarce, a sign that the unemployment rate probably remained elevated in August.
Initial claims for state unemployment benefits fell 2,000 to a seasonally adjusted 231,000 for the week ended Aug. 24, the Labor Department said on Thursday. Economists polled by Reuters had forecast 232,000 claims for the latest week.
Claims have retreated from an 11-month high in late July as distortions from temporary motor vehicle plant shutdowns for new model retooling and the impact of Hurricane Beryl faded. They remain at levels consistent with a steadily cooling labor market, which should help to allay fears of a rapid deterioration.
The Labor Department’s Bureau of Labor Statistics last week estimated that employment growth was overstated by 68,000 jobs per month in the 12 months through March. But most economists viewed this so-called benchmark revision estimate as misleading.
The benchmark estimate is based on the Quarterly Census of Employment and Wages data, derived from reports by employers to the state unemployment insurance programs. The data does not include undocumented immigrants, a group that economists believe contributed to strong job growth last year.
“The BLS revisions likely revised the data down too much because the revision is based on administrative data from unemployment insurance files, which probably do not capture many of the increased jobs filled by undocumented workers,” economists at Morgan Stanley wrote in a note.
The labor market slowdown, characterized by a big step-down in hiring, has caught the attention of Federal Reserve officials. Fed Chair Jerome Powell last Friday signaled interest rate cuts were imminent in a nod to concerns over the jobs market.
Financial markets expect the U.S. central bank to begin its easing cycle next month with a 25-basis-point reduction in its benchmark overnight interest rate, though a half-percentage point cut is on the table. The Fed has maintained its policy rate in the current 5.25%-5.50% range for more than a year, having raised it by 525 basis points in 2022 and 2023.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 13,000 to a seasonally adjusted 1.868 million during the week ending Aug. 17, the claims report showed. The so-called continued claims are near levels last seen in late 2021, indicating longer spells of unemployment.
Continuing claims data covered the period during which the government surveyed households to determine the unemployment rate for August. Economists are expecting the jobless rate this month to either have remained near a three-year high of 4.3% or fallen to 4.2%.
The unemployment rate has risen for four straight months, partly reflecting an immigration-induced surge in labor supply. (Reporting by Lucia Mutikani; Editing by Paul Simao and Nick Zieminski)