US jobless claims fall to lowest since July, signalling stability in labour market

US jobless claims fell sharply last week to their lowest level since July, while continuing claims also declined, pointing to a relatively stable labour market despite subdued hiring.

Initial claims for state unemployment benefits fell by 10,000 to a seasonally adjusted 196,000 in the week ended September 12, the US Labor Department said on Thursday. The reading was below the 208,000 economists had expected, according to a Reuters poll.

However, the drop may overstate the underlying strength of the labour market. The latest data cover the period around the Labor Day holiday, when claims can be more volatile and seasonal adjustments become harder to make, Reuters reported.

The four-week moving average of initial claims, which smooths out weekly fluctuations, fell to 203,250.

Continuing claims, which track people receiving unemployment benefits after their initial week of aid and provide a gauge of hiring conditions, fell by 39,000 to 1.73 million in the week ended September 5, according to Reuters.

The broader trend remains consistent with a labour market that has stabilised after showing signs of weakening over the summer. Jobless claims have largely stayed within a historically low range over the past year, suggesting that layoffs remain limited.

Fed raises rates

The claims data came a day after the Federal Reserve raised its benchmark interest-rate target by 25 basis points to 3.75%-4%, its first rate increase since July 2023. The central bank also signalled that borrowing costs could rise further as it seeks to bring inflation back towards its target.

Fed Chair Kevin Warsh pointed to the labour market as a key source of economic strength, saying policymakers believed the unemployment rate was broadly consistent with full employment.

The latest jobless claims data cover the week in which the US government surveyed employers for its September employment report. US employers added 162,000 jobs in August, following weaker job growth in the preceding three months.

Despite relatively low layoffs, employers have remained cautious about expanding their workforces. Economic uncertainty and higher costs have weighed on hiring, while businesses have also faced headwinds from elevated oil prices and inflationary pressures, Reuters reported.

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