The number of Americans filing new claims for unemployment benefits fell last week, surprising economists and raising hopes that the Federal Reserve will finally start cutting interest rates next month.
The Labor Department said new claims for state unemployment insurance fell to a seasonally adjusted 227,000 for the week ended Aug. 10, below the 235,000 that economists had expected. According to a Reuters poll.
Thursday’s report showed the unemployment rate rose for a fourth straight month due to an influx of immigrants seeking work in the U.S., while hiring stagnates and the labor supply increases.
Thursday’s news came a day after the federal government said inflation rose 2.9% last month from a year earlier, the first time price growth has fallen below 3% since 2021.
Now, some economists suspect the Fed will turn to the labor market as a new indicator for cutting rates.
“these [job] “The jobs report is where we’re really going to see action over the next few months,” Nathan Sheets, global economist at Citi, told Yahoo Finance. “It’s definitely what the Fed will be watching most.”
Thursday’s figures came after a particularly weak July jobs report earlier this month, which showed the unemployment rate at 4.3%, the highest in three years, sent investors into a panic.
The latter, combined with the Fed’s announcement a few days earlier that it would hold interest rates, stoked fears of a crash, rattling markets and triggering a sharp sell-off.
In response to soaring inflation caused by the pandemic, the Fed plans to raise interest rates by 525 basis points from 2022 to 2023, which has prompted companies to cut back on hiring.
Layoffs have remained relatively low, although other major tech and media companies, including Google parent Alphabet, Amazon, Tesla, Paramount Pictures, Sports Illustrated and the Los Angeles Times, have cut staff throughout the year.
The Fed has kept interest rates in a range of 5.25% to 5.50% for a year, and Chairman Jerome Powell reaffirmed the Fed’s goal of seeing inflation reach 2% before cutting rates in July.
The number of Americans still receiving benefits after the first week of aid fell by 7,000 in the week ended Aug. 3 to a seasonally adjusted 1.864 million, according to jobless claims reports.
The number of workers receiving long-term benefits is approaching 2021 levels but remains high as a labor glut makes it increasingly difficult for Americans to find work.
With post wire
