Washington, Aug. 17 (BNA): The number of Americans filing new claims for unemployment benefits fell last week, pointing to continued tightness in the labor market even as job growth slows.
Labor market tightness is underpinning the economy, with data this week showing a solid increase in retail sales in July and a surge in single-family homebuilding, which prompted economists to raise their growth estimates for the third quarter. But that resilience raises the risk that the Federal Reserve could raise interest rates again, Reuters reported.
“The labor markets are not imploding,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “The economy may be heating up instead of cooling down as the monetary medicine of higher 5.5% interest rates is not slowing aggregate demand like the economics textbooks say it should.”
Initial claims for state unemployment benefits dropped 11,000 to a seasonally adjusted 239,000 for the week ended Aug. 12, the Labor Department said on Thursday. Economists polled by Reuters had forecast 240,000 claims for the latest week.
Claims surged in the week ending Aug. 5, with applications in Ohio accounting for a big chunk of the increase.
The state, which has previously experienced fraudulent filings, attributed the jump to layoffs in the manufacturing and automobile industries. Automakers normally idle plants in July to retool for new models.
Unadjusted claims dropped 15,067 to 212,850 last week. Claims in California declined by 3,519. There were also notable decreases in Texas, Michigan, New Jersey and Pennsylvania, which more than offset a sizeable increase in Virginia.
The labor market is only slowing at the margin, with job gains in July being the second-smallest since December 2020. The unemployment rate is hovering around levels last seen more than 50 years ago. There were 1.6 job openings for every unemployed person in June.
Claims, relative to the size of the labor market, are way below the 280,000 level that economists say would signal a significant slowdown in job growth.
Minutes of the Fed’s July 25-26 meeting published on Wednesday showed that while policymakers acknowledged “signs that demand and supply were coming into better balance,” they “judged that further progress toward a balancing of demand and supply in the labor market was needed, and they expected that additional softening in labor market conditions would take place over time.”
U.S. stocks opened higher. The dollar fell against a basket of currencies. Longer-dated U.S. Treasury yields rose.
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