The number of Americans filing new claims for unemployment benefits fell last week as layoffs remained low. However, businesses’ reluctance to increase hiring due to weak domestic demand could push the unemployment rate to 4.3% in August.
Initial claims for state unemployment benefits fell 3,000 to a seasonally adjusted 224,000 for the week ended Aug. 9, the U.S. Labor Department said on Thursday. The figure was better than economists’ expectations in a Reuters poll of 228,000 claims.
The labor market is in a state of low layoffs but weak hiring, as businesses grapple with President Donald Trump’s protectionist trade policies that have raised average import tariffs to their highest levels in a century. Job gains have averaged just 35,000 a month over the past three months, while domestic demand growth in the second quarter was the slowest since the fourth quarter of 2022.
The number of individuals receiving benefits after the first week of aid, a proxy measure of hiring activity, fell 15,000 to 1.953 million for the week ended Aug. 2. The persistently high claims tally is in line with consumer sentiment that jobs are becoming harder to come by. Economists said the trend is in line with expectations that the unemployment rate will rise to 4.3% in August from 4.2% in July.
Financial markets have priced in a possible interest rate cut by the Federal Reserve next month as the labor market weakens. However, some economists have warned that persistently high services inflation and expectations of higher goods prices due to tariffs could make policymakers cautious about acting. The U.S. central bank kept its benchmark overnight interest rate in a range of 4.25%-4.50% last month for the fifth straight time since December.
