Unexpected Decline in Initial Jobless Claims in the USA

Latest data from the U.S. Department of Labor shows that the number of new applications for unemployment benefits has unexpectedly decreased. In the week ending September 21, the number of initial claims fell by 4,000 to a seasonally adjusted 218,000. This development contradicts economists' forecasts, who had expected 225,000 applications, and indicates a still robust U.S. labor market. Although the labor market has recently lost some momentum—with declining job openings and reduced hiring—the layoff numbers remain stable. Since the unemployment benefit claims reached a peak of 250,000 in July due to temporary plant closures in the automotive industry, they have largely remained at a similar level. A potential increase in applications could be caused by the current strike of around 30,000 machinists at Boeing. This has forced Boeing to announce temporary cessations for tens of thousands of employees, including a large number of U.S.-based executives and managers. However, workers who strike are not eligible for unemployment benefits, although the work interruption could still impact Boeing’s suppliers. The number of individuals continuing to receive unemployment benefits after an initial week of support—an indicator of hiring willingness—increased by 13,000 to a seasonally adjusted 1.834 million in the week ending September 14. These so-called continuing claims have declined since their peak in July, partly due to policy changes in Minnesota that allow non-teaching staff to receive unemployment benefits during the summer break. Interestingly, the unemployment rate fell to 4.2% in August, down from 4.3% in July. This followed an increase in the rate in April 2023 to 3.4%, driven by a significant rise in immigration that expanded the labor force and raised concerns about a rapid deterioration of the labor market. To counteract a potential negative development, the U.S. Federal Reserve last week lowered interest rates by 50 basis points to a range of 4.75% to 5.00%—the first reduction in borrowing costs since 2020. Fed Chairman Jerome Powell emphasized that this measure is intended to underscore policymakers’ readiness to secure a low unemployment rate.