By Lucia Mutikani
WASHINGTON (Reuters) – The number of Americans filing new applications for unemployment benefits dropped to a four-month low last week, pointing to solid job growth in September and offering confirmation that the economy continued to expand in the third quarter.
The weekly jobless claims report from the Labor Department on Thursday, the most timely data on the economy’s health, also showed unemployment rolls shrunk to levels last seen in early June. The U.S. central bank on Wednesday cut interest rates by 50 basis points, the first reduction in borrowing costs since 2020, which Federal Reserve Chair Jerome Powell said was meant to demonstrate policymakers’ commitment to sustaining a low unemployment rate.
“These hard numbers confirm the message delivered by Fed Chair Powell yesterday,” said Carl Weinberg, chief economist at High Frequency Economics.
“The labor market is softening but not imploding as you would expect in a recession. Fed policy is aimed at supporting the job market before a recession shapes up.”
Initial claims for state unemployment benefits dropped 12,000 last week to a seasonally adjusted 219,000 for the week ended Sept. 14, the lowest level since the middle of May, the Labor Department said on Thursday. Economists polled by Reuters had forecast 230,000 claims for the latest week.
Unadjusted claims increased by 6,436 to 184,845 last week, amid notable rises in California, Texas and New York, which more than offset a decrease of 2,055 in Massachusetts.
The labor market has cooled considerably, with a big step-down in hiring and a decrease in job openings, which has raised concerns of a deterioration in conditions that could undermine the economic expansion. Layoffs, however, remain low, which is helping to prop up the economy, through solid consumer spending.
Economic growth estimates for the third quarter are around a 3.0% annualized rate. The economy grew at a 3.0% pace in the second quarter.
FED SUPPORT
Although Powell told reporters on Wednesday that “the labor market bears close watching,” he also said policymakers were not hearing from businesses that a rise in layoffs was “getting ready to happen.” Powell added that “the time to support the labor market is when it’s strong, and not when you begin to see the layoffs.”
The Fed raised its benchmark overnight interest rate by 525 basis points in 2022 and 2023.
Claims have been little changed since dropping from an 11-month high of 250,000 in late July, which economists mostly blamed on temporary plant shutdowns in the automobile industry.
The dollar climbed against a basket of currencies on Thursday while U.S. Treasury yields rose.
The claims data covered the week during which the government surveyed business establishments for the nonfarm payrolls component of September’s employment report. Claims fell considerably between the August and September survey weeks.
Nonfarm payrolls increased by 142,000 jobs in August, below the average monthly gain of 202,000 over the past 12 months.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, fell 14,000 to a seasonally adjusted 1.829 million during the week ending Sept. 7, the lowest level since early June, the claims report showed.
The so-called continuing claims have declined from more than 2-1/2-year highs in July.
That jump was mostly attributed to policy changes in Minnesota that allowed non-teaching staff in the state to file for unemployment benefits during the summer school holidays. Continuing claims data next week could offer more clues on the health of the labor market in September.
