The number of Americans filing applications for unemployment benefits increased last week, but the trend in claims remained consistent with tightening labor market conditions.
The health of the labor market, which so far does not appear to have been impacted by a bitter trade fight between the United States and China, could help to determine whether the Federal Reserve will cut interest rates again this year.
The Fed on Wednesday lowered its benchmark overnight rate for the first time since 2008, to insure against downside risks to the economy from the trade tensions and slowing global growth. Fed Chairman Jerome Powell said the preemptive monetary policy easing was “not the beginning of a long series of rate cuts.”
Initial claims for state unemployment benefits rose 8,000 to a seasonally adjusted 215,000 for the week ended July 27, the Labor Department said on Thursday. Economists polled by Reuters had forecast claims increasing to 214,000 in the latest week. The Labor Department said no claims were estimated last week.
The labor market has remained resilient even as the economy has shifted into lower gear, mainly as the stimulus from last year’s $1.5 trillion tax cut package fades. Powell on Wednesday gave an upbeat assessment of the labor market, saying “people who live and work in low-and middle-income communities tell us that many who have struggled to find work are now getting opportunities to add new and better chapters to their lives.”
U.S. financial markets were little moved by the data as investors continued to digest Wednesday’s rate decision and Powell’s comments.
The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 1,750 to 211,500 last week.
The claims data has no bearing on July’s employment report, which is scheduled to be released on Friday. According to a Reuters survey of economists, nonfarm payrolls likely increased by 164,000 jobs in July after surging by 224,000 in June.
Job gains averaged 172,000 per month in the first half of this year, below the monthly average of 223,000 in 2018, mainly because of a shortage of qualified workers.
The pace of job gains, however, remains above the roughly 100,000 per month needed to keep up with growth in the working-age population. The unemployment rate is expected to have held steady at 3.7% in July.
Thursday’s claims report also showed the number of people receiving benefits after an initial week of aid increased 22,000 to 1.70 million for the week ended July 20. The four-week moving average of the so-called continuing claims edged up 750 to 1.70 million.