More Americans filed for unemployment benefits last week, but layoffs remain low

The number applying for unemployment benefits rose modestly last week but remains at healthy levels

The number of Americans filing for unemployment benefits saw a moderate increase last week, yet remains at a stable level.

According to the Labor Department's report on Thursday, jobless claims rose by 6,000 to 225,000 for the week ending September 28, slightly exceeding analysts' expectations of 221,000. The four-week average of claims, which helps smooth out weekly fluctuations, decreased by 750 to 224,250. Jobless benefit applications are generally seen as a reflection of US layoffs in a given week.

Recent labor market data suggests that high interest rates may be starting to impact the job market. In response to weakening employment data and decreasing consumer prices, the Federal Reserve cut its benchmark interest rate by half a percentage point last month, shifting its focus from controlling inflation to supporting the job market.

The Fed aims to achieve a "soft landing," where it curbs inflation without triggering a recession. This was the Fed's first rate cut in four years, following a series of rate hikes in 2022 and 2023 that pushed the federal funds rate to a 20-year high of 5.3%.

With inflation steadily declining towards the Fed's 2% target, Chair Jerome Powell recently stated that it is largely under control. During the initial four months of 2024, weekly applications for unemployment benefits averaged a mere 213,000 before seeing an increase in May.

By late July, they reached 250,000, reinforcing the idea that high interest rates were finally tempering the previously booming US job market. In August, US employers added 142,000 jobs, an improvement from July's meagre 89,000, but still significantly below the January-June monthly average of nearly 218,000.

The jobs report for September is set to be released this Friday. Last month, the Labor Department revealed that the US economy added 818,000 fewer jobs from April 2023 through March this year than initially reported.

This revised total is also seen as evidence of a steady slowdown in the job market, prompting the Fed to begin reducing interest rates. Thursday's report indicated that the total number of Americans receiving unemployment benefits dropped by 1,000 to approximately 1.83 million for the week ending September 21.

In separate news on Thursday, some retailers announced plans to increase hiring for the holiday season, although fewer seasonal employees are expected to be hired this year.