The number of Americans filing for unemployment benefits unexpectedly dropped to a two-month low last week, a sign that employers are continuing to hold on to workers in a historically tight labor market.
Figures released Thursday by the Labor Department show that applications for the week ended Aug. 27 fell to 232,000 from the downwardly revised 237,000 recorded a week earlier. That is still above the 2019 pre-pandemic average of 218,000 claims.
Continuing claims, or the number of Americans who are consecutively receiving unemployment aid, rose to 1.438 million, up by 26,000 from the previous week's revised level. One year ago, nearly 12.18 million Americans were receiving unemployment benefits.
For months, the labor market has remained one of the few bright spots in the economy, with the July jobs report showing that the unemployment rate dropped to 3.5% for the first time since the beginning of the COVID-19 pandemic.
Earlier this week, the government reported that job openings climbed past 11.2 million – meaning there are roughly two available jobs per worker. But data on Wednesday from payroll processing firm ADP signaled that hiring cooled in August, with private companies adding just 132,000 new jobs, the lowest since May.
There are other signs that the labor market is starting to weaken, with a plethora of companies, including Alphabet's Google, Walmart, Apple, Meta and Microsoft, announcing hiring freezes or layoffs in recent weeks.
The data precedes the release of the August jobs report on Friday morning, which is expected to show that employers hired 300,000 workers following a gain of 528,000 in July. The unemployment rate is expected to hold steady at 3.5%, the lowest since the pandemic began two years ago.
The Federal Reserve is closely watching the labor market as it tries to cool economic growth and wrestle inflation under control without triggering a recession.
Policymakers have indicated over the past week that they remain laser-focused on tackling inflation, despite signs the economy is starting to slow.
Cleveland Fed President Loretta Mester on Wednesday said she anticipates the benchmark rate will climb above 4% this year and remain elevated for some time until prices start to return closer to the central bank's 2% target.
"My current view is that it will be necessary to move the fed funds rate up to somewhat above 4% by early next year and hold it there," Mester, a voting member of the Federal Open Market Committee, said. "I do not anticipate the Fed cutting the fed funds rate target next year."