The number of Americans applying for jobless benefits fell again last week as the labor market continues defy the Federal Reserve’s attempt to cool it through higher interest rates.
U.S. applications for jobless claims fell by 12,000 to 237,000 for the week ending July 8, from 249,000 previous week, the Labor Department reported Thursday.
The four-week moving average of claims, which smooths out some of the week-to-week ups and downs, fell by 6,750 to 246,750.
Jobless claim applications are seen as a proxy for the number of layoffs in a given week.
Overall, 1.73 million people were collecting unemployment benefits the week that ended July 1, 11,000 fewer than the previous week.
For three weeks in late May and early June, jobless claims had appeared to reach a sustained, higher level, above 260,000. Even so, that increase may not have been enough for Fed officials to pivot from raising its main rate at its next meeting.
The U.S. economy has added jobs at a frenetic pace since more than 20 million jobs vanished when the COVID-19 pandemic hit in the spring of 2020. Americans have enjoyed unusual job security with companies reluctant to shed staff in a worker-friendly labor environment.
U.S. employers continue to add jobs at a healthy pace each month, often surprising economists and painting a mostly encouraging picture of the labor market and its current 3.6% unemployment rate. Fed officials have said that the unemployment rate needs to rise well past 4% to bring inflation down.
For the most part, the U.S. economy has been been resilient in the face of the Federal Reserve’s aggressive rate-hiking campaign in its effort to extinguish persistent inflation not seen since the early 1980s. The rate hikes have slowly helped to suppress inflation, which fell last month to its lowest level since early 2021..
Two weeks ago, the government reported that the U.S. economy grew at a 2% annual pace from January through March, much higher than the previous estimate of 1.3%. That, combined with a resilient labor market, has most economists predicting that Fed officials will go through with another rate hike or two before the end of the year in its ongoing fight against inflation.
In June, the Fed chose not to increase the central bank’s benchmark borrowing rate for the first time in 15 months, though some officials said they expect to add another half-point to rates by the end of the year.
There have been a number high-profile layoffs recently, mostly in the technology sector, where many companies admit they hired too many people during the pandemic.
IBM, Microsoft, Salesforce, Twitter, Lyft, LinkedIn, Spotify and DoorDash have all announced layoffs in recent months. Amazon and Facebook parent Meta have each announced two sets of job cuts since November.
Outside the tech sector, McDonald’s, Morgan Stanley and 3M have also recently announced layoffs.
The manufacturing sector has been contracting and the real estate sector has suffered because of higher interest rates. Three bank failures also have been blamed in part on higher interest rates.
Matt Ott, The Associated Press