WASHINGTON (Reuters) -The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, touching the lowest level in two months amid ongoing labor market tightness and defying efforts by the Federal Reserve to slow demand.
Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 228,000 for the week ended July 15, the lowest level since mid-May, the Labor Department said on Thursday. Economists polled by Reuters had forecast 242,000 claims for the latest week.
“The claims data show that the labor market remains resilient and businesses have yet to start shedding workers at a rapid pace, despite five percentage points of tightening,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.
Unadjusted claims fell by 326 to 257,976 last week. Claims surged by 5,059 in California and increased by 4,616 in Georgia. There were also notable rises in filings in South Carolina and Oregon. These were more than offset by significant declines in Michigan, Kentucky, Indiana, New York, New Jersey, Iowa and Illinois.
Though the labor market remains tight, last week’s drop in claims was likely exaggerated by difficulties adjusting the data for seasonal patterns. Automakers normally idle plants in July to retool for new models.
But these temporary plant closures do not always happen around the same time, which could throw off the model that the government uses to strip out seasonal fluctuations from the data. 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.
The labor market remains tight as companies hoard workers after struggling to find labor during the COVID-19 pandemic, despite the economy slowing amid the Fed’s hefty interest rate increases.
The U.S. central bank, which has raised its policy rate by 500 basis points since March 2022, is expected to resume hiking rates next month after skipping an increase at its meeting in June.
The claims data covered the week during which the government surveyed businesses for the nonfarm payrolls component of July’s employment report. Claims fell during the June and July survey weeks. The economy added 209,000 jobs in June.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 33,000 to 1.754 million during the week ending July 8, the claims report showed.
At current levels, the so-called continuing claims are low by historical standards, indicating that some laid-off workers are quickly finding work.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Paul Simao)
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