The number of Americans filing new claims for unemployment benefits dropped to an eight-month low last week, but a rebound is likely as a partial strike by the United Auto Workers (UAW) union forces automobile manufacturers to temporarily lay off workers because of shortages of some materials.
The report from the Labor Department on Thursday offered an upbeat assessment of the jobs market, with the number of people on unemployment rolls also falling during the first week of September to the lowest level since January. Though demand for labor is slowing, overall labor market conditions have remained tight despite higher interest rates.
“The U.S. labor market continues to outperform expectations,” said Eugenio Aleman, chief economist at Raymond James.
Initial claims for state unemployment benefits dropped 20,000 to a seasonally adjusted 201,000 for the week ended Sept. 16, the lowest level since January, the Labor Department said on Thursday. Economists polled by Reuters had forecast 225,000 claims for the latest week.
Claims are in the lower end of their 194,000-265,000 range for this year. Unadjusted claims rose only 67 to 175,661 last week. There were notable declines in claims in Indiana and California, which mostly offset sizeable increases in South Carolina, New York and Georgia.
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The Federal Reserve held interest rates steady on Wednesday but stiffened its hawkish stance, with a further rate increase projected by the end of the year and monetary policy to be kept significantly tighter through 2024 than previously expected.
Since March 2022, the U.S. central bank has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range.
Fed Chair Jerome Powell told reporters on Wednesday that “the labor market remains tight, but supply and demand conditions continue to come into better balance.” Job growth and openings have been slowing.
The UAW last week launched a targeted strike against Ford (F.N), GM (GM.N) and Stellantis (STLAM.MI), impacting one assembly plant at each company. It has threatened to broaden the work stoppages, which for now only involve about 12,700 of the affected 146,000 UAW members.
Though striking workers are not eligible for unemployment benefits, the walkout has snarled supply chains.
Ford last Friday furloughed 600 workers who are not on strike, while GM said it expected to halt operations at its Kansas car plant, affecting 2,000 workers. Chrysler parent Stellantis said it would temporarily lay off 68 employees in Ohio and expects to furlough another 300 workers in Indiana.
The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of September’s employment report.
The strike is unlikely to have an impact on payrolls as it started towards the end of the survey week. Workers most likely received pay for that week.
Claims fell between the September and August survey period.
Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will offer more clues on the state of the labor market in September.
The so-called continuing claims declined 21,000 to 1.662 million during the week ending Sept. 9, also the lowest level since January, the claims report showed. Continuing claims remain historically low, a reminder that labor market conditions are still tight.
Source: Reuters
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