The number of Americans filing new unemployment claims reached a four-month low last week, signaling robust job growth in September and affirming that the economy expanded steadily during the third quarter.
The Labor Department’s report on Thursday, considered a key indicator of the U.S. economy’s health, showed a drop in unemployment filings and a notable decrease in jobless claims to levels unseen since early June.
This news follows the Federal Reserve’s decision to reduce interest rates by 50 basis points on Wednesday, marking the first rate cut since 2020. Federal Reserve Chair Jerome Powell emphasized that the rate cut, which brings the range to 4.75%-5.00%, is aimed at sustaining low unemployment rates and supporting ongoing economic expansion.
“These data confirm the message delivered by Fed Chair Powell. While the labor market is softening, it’s far from collapsing, and the Fed’s policy aims to maintain this momentum,” said Carl Weinberg, chief economist at High Frequency Economics.
Jobless Claims Hit Four-Month Low
Initial claims for state unemployment benefits dropped by 12,000, reaching a seasonally adjusted total of 219,000 for the week ending Sept. 14, according to the Labor Department. This figure marks the lowest level since mid-May, surpassing economists’ expectations of 230,000 claims.
Unadjusted claims rose by 6,436 to 184,845 last week, driven by increases in states such as California, Texas, and New York, which offset declines in Massachusetts. Despite this, the labor market has cooled considerably with decreased hiring and fewer job openings. However, layoffs remain low, bolstering the economy through continued strong consumer spending.
Economic growth projections for the third quarter hover around a 3.0% annualized rate, consistent with the 3.0% growth observed in the second quarter, a pace higher than the Federal Reserve’s long-term non-inflationary target of 1.8%.
Claims have remained largely steady since dropping from a peak of 250,000 in July, a spike primarily attributed to temporary automotive plant closures. Economists suggest that seasonal adjustment issues may have played a role in the fluctuations in claims last year.
Abiel Reinhart, an economist at J.P. Morgan, remarked, “Given the limited weakening in the labor market, we can expect continued low jobless claims in the months ahead.”
Boeing Furloughs Could Affect Future Claims
The aerospace company Boeing (BA.N) announced it would temporarily furlough tens of thousands of employees, including a large number of executives and managers. This development comes after roughly 30,000 machinists went on strike, halting production of the 737 MAX and other aircraft. Reinhart speculated that the furloughs could impact unemployment claims in the week ending Sept. 28, with potential further claims stemming from supply chain disruptions.
Labor Market Remains Resilient Despite Broader Economic Uncertainty
The jobless claims data coincides with the survey period for the government’s nonfarm payrolls report, which will be released in September. August saw a rise of 142,000 nonfarm payrolls, below the 12-month average of 202,000 jobs added monthly. Despite the slowdown, continuing claims—a measure of the number of people receiving unemployment benefits after their initial week of aid—fell by 14,000 to 1.829 million, the lowest level since early June.
Continuing claims have steadily declined after spiking earlier in the summer, which was largely due to policy changes in Minnesota that allowed non-teaching staff to file for unemployment during school breaks. Data from the coming weeks will provide further insight into the labor market’s health as the third quarter progresses.
Housing Market Struggles Despite Price Increases
While the labor market remains resilient, the housing market continues to face challenges. A separate report from the National Association of Realtors showed that existing home sales fell 2.5% in August, reaching an annual rate of 3.86 million units—the lowest in 10 months. Despite the decrease in sales, the median home price increased 3.1% from the previous year, reaching a record $416,700 for August.
Persistently high home prices, coupled with limited inventory, have kept many prospective buyers on the sidelines. Although mortgage rates have retreated to their lowest point in 18 months, many homeowners with rates below 4% remain reluctant to list their homes, further constraining supply. Lower borrowing costs, however, could stimulate demand, which may continue to keep home prices elevated.
Federal Reserve Chair Jerome Powell acknowledged that the housing market remains imbalanced, stating, “The real issue with housing is that we continue to face insufficient supply. While the Fed cannot directly solve this problem, we expect to see some normalization as interest rates stabilize.”
Housing inventory increased slightly by 0.7% in August to 1.35 million units, a 22.7% rise from the previous year. Nancy Vanden Houten, lead U.S. economist at Oxford Economics, said, “As mortgage rates continue to fall, we expect more sellers to enter the market, which should help balance out price increases fueled by higher demand.”