The number of Americans seeking unemployment benefits for the first time fell for a second week while the overall number of people on jobless relief rolls slid to the lowest level in a month, signaling a stable labor market that should give the Federal Reserve leeway to focus on containing inflation.
Meanwhile, the U.S. trade deficit in goods, which President Donald Trump is trying to reduce through his aggressive use of tariffs on imported goods, was the widest in 16 months in July as exports fell for a third straight month and capital goods imports surged on the back of the artificial intelligence build-out. The wider goods trade gap last month puts trade on track to be a net drag on U.S. gross domestic product growth for a fourth straight quarter.
Initial claims for state unemployment benefits fell 4,000 to a seasonally adjusted 203,000 for the week ended August 22, the Labor Department said on Thursday. Economists polled by Reuters had forecast 208,000 claims for the latest week.
Claims are hovering in the lower end of their 189,000-230,000 range for this year, indicating that layoffs remain low even if hiring is soft. Despite a surprise drop in employment in July, the U.S. jobless rate ticked down again to 4.1%, a historically low level.
The number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, fell 18,000 to a seasonally adjusted 1.778 million during the week ended August 15, the claims report showed. The continued claims data covered the survey week for the monthly nonfarm payrolls report for August.
Thomas Simons, chief U.S. economist at Jefferies, said recent data from payroll processor ADP and labor market analytics firm Revelio “paint a picture of a labor market that is in better balance than what is implied by the more volatile BLS (Bureau of Labor Statistics) numbers.”
“There is a modest, steady pace of private sector job creation that is right in line with the amount necessary to keep the unemployment rate steady,” Simons said. “Businesses are replacing workers who leave, mostly driven by retirements, and the modest pace of payroll expansion beyond is in line with the modest pace of labor force growth.”
Benign Job Market, Hot Inflation
Labor market stability, if sustained, gives the Fed headroom to keep its focus on containing inflation that has run above its 2% target for 65 straight months.
Thursday’s data came as Fed policymakers and other global economic officials were gathering in Jackson Hole, Wyoming, for the Kansas City Fed’s annual economic symposium, where U.S. central bank Chairman Kevin Warsh will deliver a keynote address on Friday morning. Warsh, who so far in his young term has shied away from commenting specifically on the state of the economy and direction of Fed policy, is under pressure to address a central issue: Is current inflation a problem or not, and what should be done about it?
A growing minority of his Fed colleagues are increasingly anxious about inflation, and three voting members of the rate-setting Federal Open Market Committee dissented last month with the decision to leave interest rates unchanged at 3.50% to 3.75%. The inflation measure the Fed uses to set its target held steady unexpectedly last month at 3.7%.
Kansas City Fed President Jeffrey Schmid, the host of the Jackson Hole conference, described inflation as “still stubborn” and “still sticky” in a CNBC interview on Thursday. “I don’t know what we’re restricting currently with the rate policy that we’re at today,” he said.
Chicago Fed President Austan Goolsbee also said inflation is his top concern.
“Everybody should be on edge, and I would say my biggest fear in the short run continues to be that inflation is not under control,” Goolsbee said on the Rapid Response podcast.
Trade Gap Widest Since Pre-Liberation Day Rush
A separate report from the Census Bureau showed the U.S. goods trade deficit widened to $118.8 billion in July from $101.4 billion in June, marking the largest goods trade gap since March 2025, when it hit a record as importers rushed to bring in goods ahead of Trump’s “Liberation Day” tariffs announcement.
Exports, which had hit a record in April, declined 2.9% to $199.4 billion, the lowest level since January. The decline was led by an 11.2% drop in exports of industrial goods.
Imports rose 3.7% to $318.2 billion, the highest level since the record high in March 2025, led by an 11.3% jump in capital goods imports, likely tied to equipment needed to power the AI investment boom.
“This category has been boosted by relentless business spending on high-tech goods associated with the AI buildout, which shows no signs of slowing at this point,” said Matthew Martin, senior U.S. economist at Oxford Economics. “We expect capital goods imports to support strong growth in imports well into 2027.”
The widening trade gap likely means trade will be a net drag on gross domestic product growth for a fourth straight quarter in the third quarter, Martin said, estimating a drag of 1 percentage point. Trade subtracted 1.14 percentage point from growth in the second quarter, Commerce Department data released Wednesday showed.
(Reporting by Dan Burns, additional reporting by Michael S. Derby; Editing by Chizu Nomiyama, Paul Simao and Nick Zieminski)
