The number of Americans filing initial claims for unemployment benefits fell more than expected last week, easing fears of a labor market collapse that had sent markets plummeting.
The Labor Department said on Thursday that seasonally adjusted claims for unemployment insurance fell by 17,000 to 233,000 for the week ended Aug. 3, the biggest decline in nearly 11 months.
Economists polled by Reuters had expected jobless claims to reach 240,000 in the latest week.
The latest jobless claims figures are being seen as a positive sign following a weak jobs report on Friday that showed hiring slowed significantly last month, fuelling calls for the Federal Reserve to cut interest rates before its next meeting in September.
The Dow Jones Industrial Average surged more than 500 points on the positive report, while the Nasdaq and S&P 500 rose nearly 2% after a volatile week for all three major indexes.
Jobless claims in recent weeks have hovered near the highs of the year, while layoffs generally remain low.
Government data released last week showed the rate of layoffs in June was the lowest in more than two years.The labor market slowdown is being blamed on the Fed’s planned interest rate hikes in 2022 and 2023 sapping demand and causing hiring to dwindle.
So far, strong consumer demand and a resilient labor market have helped the economy avoid the recession that many economists predicted during the Federal Reserve’s prolonged flurry of interest rate hikes that began in March 2022.
As inflation continues to moderate, the Fed’s goal of a soft landing — containing inflation without triggering a recession or mass layoffs — appears within reach.
The Fed left interest rates unchanged last Wednesday, but officials strongly hinted that a rate cut was possible in September if the data maintained recent trends.
Interest rate futures contracts currently suggest there is about a 70% chance that the Fed will begin slashing borrowing costs with a larger-than-usual 50 basis point cut in interest rates starting next month.
According to the unemployment claims report, the number of people receiving benefits in the first week of assistance, a measure of employment, increased by 6,000 in the week ended July 27, to a seasonally adjusted 1.875 million.
The four-week average number of claims, which smooths out weekly fluctuations to some extent, increased by 2,500 to 238,000.
This year, job cuts have been made across a range of sectors, from agricultural manufacturer Deere to media companies like CNN.
With post wire
