Fewer Americans applied for unemployment benefits last week, with the labour market continuing to cruise along despite higher interest rates intended to cool hiring.
U.S. applications for jobless claims fell by 9,000 to 228,000 for the week ending July 15, from 237,000 previous week, the U.S. Labor Department reported Thursday.
The four-week moving average of claims, which evens out some of the weekly volatility, fell by 9,250 to 237,500.
Jobless claim applications are viewed as reflective of the number of layoffs in a given week.
For three weeks in late May and early June, jobless claims had appeared to reach a sustained, higher level, above 260,000. But the past four weeks, claims have retreated and the labour market remains historically healthy.
Since more than 20 million jobs vanished when the Covid-19 pandemic hit in the spring of 2020, U.S. employers have added jobs at a blistering pace, more often than not beating forecasts. Despite the fastest interest rate hikes since 1989, the unemployment rate has hardly budged and remains historically low at 3.6%.
Fed officials have said that the unemployment rate needs to rise well past 4% to bring inflation down, but a report last week showed that consumer prices fell to their lowest level since early 2021 — 3% in June compared with a year earlier — and much closer to the Fed’s target of 2%.
The U.S. economy has broadly been resilient in the face of the Federal Reserve’s aggressive rate-hiking campaign in its effort to extinguish persistent inflation not seen since the early 1980s.
The U.S. economy grew at a 2% annual pace from January through March. Combined with a resilient labour market, most economists now expect Fed officials to go through with another rate hike or two before the end of the year in its ongoing fight against inflation.
In June, the Fed chose not to increase the central bank’s benchmark borrowing rate for the first time in 15 months, though some officials said they expect to add another half-point to rates by the end of the year.
There have been a number of high-profile layoffs recently, mostly in the technology sector, with many companies saying they overhired during the pandemic.
IBM, Microsoft, Salesforce, Twitter, Lyft, LinkedIn, Spotify and DoorDash have all announced layoffs this year. Amazon and Facebook parent Meta have each announced multiple job cuts since November.
Outside the tech sector, McDonald’s, Morgan Stanley and 3M have also recently shed employees.
Overall, 1.75 million people were collecting unemployment benefits the week that ended July 8, about 33,000 more than the previous week.