Weekly US Jobless Claims Are Declining 

According to new reports from the US Labor Department, the number of Americans who are filing new applications for unemployment benefits is declining, giving officials hope that the job market may not be deteriorating as drastically as previously believed. 

The recent data from the Labor Department “showed unemployment rolls shrinking to levels last seen in mid-June. It reduces the urgency for the Federal Reserve to deliver a 50 basis points interest rate cut this month,” according to Lucia Mutikani from Reuters. 

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“Economists shrugged off other data showing private employers hired the smallest number of workers in August. Most expect the U.S. central bank to kick off its easing cycle with a quarter-point rate reduction as domestic demand remains solid,” Mutikani wrote.

“A step-down in hiring, which pushed the unemployment rate to near a three-year high of 4.3% in July rattled investors and fanned concerns that a recession was stalking the economy.”

“There are signs of a slowdown in hiring with fewer job openings, but until payroll jobs actually decline there is no recession. At the moment, it does not look like the Fed is behind the curve,” said Christopher Rupkey, chief economist at FWDBONDS.

For the week ending in August 31st, state unemployment benefits dropped by a total of 5,000 to 227,000. This marks the lowest levels since early July. 

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“There was probably some residual seasonality boosting claims earlier in the summer, and that, like last year’s claims, could decline into September absent a more serious worsening in the labor market,” said Abiel Reinhart, an economist at J.P. Morgan.

In the federal government’s “Beige Book” report this week, employment levels are “generally flat to up slightly in recent weeks. A few (Fed) districts reported that firms reduced shifts and hours, left advertised positions unfilled, or reduced headcounts through attrition, though accounts of layoffs remained rare.”

“The number of people receiving benefits after an initial week of aid, a proxy for hiring, decreased 22,000 to a seasonally adjusted 1.838 million during the week ending Aug. 24, the lowest level since mid-June,” the claims report stated.

“Financial markets saw a roughly 41% probability of a half-point rate cut at the Fed’s Sept. 17-18 policy meeting,” according to CME Group’s FedWatch Tool.

“The chances of further rate reductions this year were boosted by another report from the Labor Department’s Bureau of Labor Statistics showing unit labor costs rose at a much slower pace than initially estimated in the second quarter amid strong worker productivity,” wrote Mutikani.