The number of Americans filing new applications for unemployment benefits fell last week, reversing the prior week’s jump, but the labor market has softened as both the demand for and supply of workers have diminished.
Though the report from the Labor Department on Thursday confirmed layoffs remained relatively low, the hiring side of the labor market has almost stalled. Demand for workers has slowed, with economists blaming uncertainty stemming from tariffs on imports. At the same time, an immigration crackdown has reduced labor supply, creating what Federal Reserve Chair Jerome Powell on Wednesday described as a “curious balance.”
Economists welcomed the decline in applications as a sign of the economy’s resilience. Some even suggested that the U.S. central bank’s concerns about the labor market were probably overblown and further interest rate cuts were unwarranted.
“We were all battered by a lot of negative talk about the labor market in the Fed statements and Chair Powell’s comments yesterday,” said Carl Weinberg, chief economist at High Frequency Economics. “The steady trend in claims continues at a rate that is way too low to signal a recession. It also undermines calls for more and bigger rate cuts, both at the Fed and in the markets.”
Initial claims for state unemployment benefits decreased 33,000 to a seasonally adjusted 231,000 for the week ended September 13. Claims in the prior week had jumped to 264,000, a level last seen in October 2021.
That increase in applications was concentrated in Texas, with the state’s Workforce Commission later saying it had since the September 1 Labor Day holiday “observed an uptick in identity fraud claim attempts aimed at exploiting the unemployment insurance system.”
Economists polled by Reuters had forecast 240,000 claims for the latest week. Unadjusted claims dropped 10,384 to 194,478 last week, with sharp decreases in Texas, Connecticut and Michigan. These drops more than offset notable increases in New York, South Carolina and Massachusetts.
There was a moderate increase in claims by federal workers, which are filed under a separate program and with a one-week lag. Filings could rise next month, with severance payments for thousands of public workers ending on September 30.
Fed Cuts Interest RatesÂ
The U.S. central bank on Wednesday cut its benchmark overnight interest rate by a quarter of a percentage point to the 4.00%-4.25% range and projected a steady pace of reductions for the rest of 2025 to help the labor market.
The Fed paused its policy easing cycle in January because of uncertainty over the inflationary impact of President Donald Trump’s import tariffs.
Trade policy continued to pose a downside risk to the economy, with the Conference Board’s leading indicator, a gauge of future economic activity, falling 0.5% in August after ticking up 0.1% in July. The Conference Board cited “higher tariffs” for the slowdown flagged by the leading indicator.
Stocks on Wall Street were trading higher. The dollar gained against a basket of currencies. U.S. Treasury yields rose.
The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of September’s employment report.
Claims fell marginally between the September and August survey weeks. Payrolls increased by only 22,000 jobs in August, with employment gains averaging 29,000 positions per month over the last three months.Â
The unemployment rate is near a four-year high of 4.3%. The government said last week that payrolls could have been overstated by 911,000 jobs in the 12 months through March.
The stall-speed pace of hiring means long bouts of unemployment for those who lose their jobs. The number of people receiving benefits after an initial week of aid fell 7,000 to a still-high 1.920 million during the week ending September 6, the claims report showed.
The decline in the so-called continuing claims was partly due to a clerical error involving data from North Carolina. The state’s continuing claims were reported as totaling only 205 during the period under review. They came in at 20,535 in the week ending August 30.
“Consequently, when the data is corrected, we can expect the national continuing claims number to rise around 20,000,” said Abiel Reinhart, an economist at J.P. Morgan. “That would still leave claims within the range of earlier weeks.”
Some people could have exhausted their eligibility to collect unemployment checks, limited to 26 weeks in most states, likely contributing to the slightly lower continuing claims.
The average duration of unemployment jumped to 24.5 weeks in August, the longest in nearly 3-1/2 years, from 24.1 in July.
“If continuing claims generally stay within the recent range and do not increase further, that would point to less upside risk for the unemployment rate,” said Gisela Young, an economist at Citigroup. “However, jobless claims only represent a subset of the unemployed people in the labor force because not everyone is eligible and unemployed individuals can only collect unemployment benefits for a limited period of time.”
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)
