New applications for US unemployment benefits fell slightly last week, though weak hiring could push the jobless rate higher in August.
The Labor Department said Thursday that initial claims for state unemployment benefits declined by 5,000 to a seasonally adjusted 229,000 for the week ending August 23.
Economists polled by Reuters had expected 230,000 claims.
The figures suggest the labour market remains steady, with layoffs still limited.
However, job creation has slowed markedly compared with last year, raising concerns about the economy’s capacity to generate new employment.
Hiring stagnates as trade policy weighs
According to government figures issued in early August, employment gains averaged 35,000 jobs per month over the previous three months, a substantial decrease from the 123,000 averaged in the same period in 2024.
According to economists, the slowdown is part of a larger “no-hire, no-fire” dynamic resulting from President Donald Trump’s protectionist trade strategy.
The administration’s tariffs have raised the nation’s average import duty to its highest level in a century, dampening domestic demand and decreasing businesses’ appetite for new employees.
With the labour market softening, many analysts predict the unemployment rate to rise to 4.3% in August from 4.2% in July.
Fed weighs scant payrolls versus stubborn inflation
The changing horizon for labour has not gone unnoticed at the Federal Reserve.
Chairman Jerome Powell hinted last week that the policymakers could be cutting the rates in the central bank’s September 16-17 meeting as a downside risk to jobs.
Simultaneously, Powell emphasised that the country is still facing high inflation pressures, which complicates the Fed’s decisions.
The Fed has kept its key overnight interest rate in a 4.25%-4.50% range since December, trying to calibrate the line between slowing growth and price instability.
Continuing claims edge lower
The number of people receiving benefits after an initial week of aid, seen as a proxy for hiring, declined by 7,000 to a seasonally adjusted 1.954 million in the week ending August 16, according to the claims report.
The continuing claims data coincided with the government’s household survey for August’s unemployment rate.
A shrinking labour pool, driven by the Trump administration’s immigration crackdown, is muting the impact of weak hiring on joblessness.
Economists noted that with reduced labour supply, the economy now needs to generate fewer than 90,000 jobs a month to match population growth.
Consumers grow more pessimistic
Consumer sentiment is becoming increasingly strained.
According to a Conference Board survey released earlier this week, the proportion of Americans who consider jobs “hard to get” increased in August to its highest level in four and a half years.
The results reflect an increase in ongoing claims and a decline in labour-market confidence.
Despite the worsening, the unemployment rate has remained relatively steady, owing to minimal layoffs and slower labour force growth.
Economists warn, however, that these trends may be disguising deeper vulnerabilities.
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