WASHINGTON (Reuters) -The number of Americans filing new applications for jobless benefits unexpectedly fell last week, pointing to stable labor market conditions, though sluggish hiring is making it harder for many laid-off workers to land new opportunities.
Initial claims for state unemployment benefits dropped 4,000 to a seasonally adjusted 217,000 for the week ended July 19, the Labor Department said on Thursday. Economists polled by Reuters had forecast 226,000 claims for the latest week.
Claims have pulled back after surging to an eight-month high in June. 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 President Donald Trump’s protectionist trade policy.
There is still a chance that claims could push higher. Claims have tended to increase in July, in part related to annual closures of motor vehicle assembly plants, whose unknown timing can throw off the model that the government uses to strip out seasonal fluctuations from the data.
“But as long as the level is within recent ranges, the increase would not be concerning,” said Gisela Young, an economist at Citigroup.
Though job growth has slowed from last year, the labor market remains stable and has provided scope for the Federal Reserve to delay resuming cutting interest rates while watching for potential inflation from the import duties. Trump is demanding the U.S. central bank lower borrowing costs.
Economists expect the Fed will keep its benchmark overnight interest rate in the 4.25%-4.50% range next Wednesday. The Fed cut rates three times in 2024, with the last move coming in December.
Though the labor market remains on a solid footing, the hesitancy by businesses to boost hiring has left many people losing their jobs 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.
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 immigrant flows means the economy now only needs to create roughly 100,000 or less 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,” said Goldman Sachs economist Elsie Peng in a note.
(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)
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