Applications for unemployment benefits fell again last week as America’s labor market continues to hum along despite attempts by the Federal Reserve to cool the economy and bring down inflation that’s still higher than optimal.
The number of Americans applying for jobless benefits fell last week by 10,000, to 230,000 the week ending August 19, the Labor Department reported Thursday.
The four-week moving average of claims, a less volatile measure, rose by 2,250 to 236,750.
Jobless claim applications are seen as reflective of the number of layoffs in a given week.
However, US job growth during much of the past year was weaker than previously projected by a little more than 300,000 jobs, according to new federal data released Wednesday.
As part of the agency’s annual benchmark review of payroll data, the Bureau of Labor Statistics revised down March 2023’s employment gains by 306,000 positions.
Despite the downward revision, which actually landed well below some estimates, America’s labor market remains historically strong.
When spread through the prior year, that amounts to about 25,000 fewer net jobs added per month, meaning that the average monthly job gain for the 12 months ended in March 2023 was nearly 312,000 versus 337,000, BLS data shows.
“The change is -0.2% and the average adjustment over the last 10 years has been 0.1%,” Chris Rupkey, economist with FwdBonds, wrote in a note Wednesday. “We don’t see any sign here that the labor market is secretly weak.”
“Keep in mind the economy is still growing, having created 870,000 more jobs since March,” he added. “July payroll employment is 156.342 million. When the economy stops growing, we will see non-farm payroll employment fall. No recession looming here in the benchmark revision.”
Slower but still strong
The bulk of the downward revisions were in the transportation and warehousing sector (down 146,400) as well as the professional and business services sector (down 116,000).
“It’s not an eye-opening revision that would really change the picture in terms of where the economy is at right now,” Brett Ryan, senior US economist for Deutsche Bank, told CNN in an interview.
For now, the economy continues to do its darnedest to stave off the breathless calls for an impending recession: Job growth has slowed from a red-hot clip to a steadily strong pace, layoffs haven’t become widespread and consumers continue to spend enough to keep the economy growing.
“I think that the probability of the economy slipping into a recession near term has certainly diminished,” he said.
For now, Ryan and other Deutsche Bank economists still have a recession as their base case, but they plan to revisit those projections in the coming weeks after a key series of economic data is released (including the August jobs report, a critical inflation and consumer spending gauge and GDP revisions).
Some of the biggest headwinds include rising delinquency rates on credit card and auto loan debt, the drawdown of excess savings as well as slower job growth, he said.
“But what is different is that the momentum going into those headwinds, which are all about to hit in [the fourth quarter], looks a little better,” he said. “And that leaves the conclusion that maybe the economy is able to weather these upcoming headwinds.”
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Clearer picture
Federal data is fluid and frequently subject to change as more detailed and accurate information becomes readily available. The Labor Department’s monthly jobs report is based upon survey responses from employers across a wide swath of industries. The initial estimate is then revised twice more.
Every year, the BLS conducts a revision to the data from its monthly survey of businesses’ payrolls, then benchmarks the March employment level to those measured by the Quarterly Census of Employment and Wages program.
The QCEW provides a more comprehensive read on the number of businesses, employees and wages at the state, regional and county level because it derives that data from quarterly tax reports submitted by businesses to their states. Given that process, the QCEW comes at a significant lag: The data for the first quarter of 2023 was also released Wednesday.
Wednesday’s preliminary benchmark revision won’t change the existing monthly employment data for now. The monthly totals for 2022 will be updated in February 2024, when the final benchmark revision is issued.
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The latest jobless numbers
In an attempt to bring down four-decade high inflation, the Federal Reserve raised interest rates 11 times in the past year-and-a-half to the current 5.4%, a 22-year high.
Part of the Fed’s reasoning was to cool the job market and bring down wages, which many economists believe suppresses price growth. Though inflation has come down significantly during that stretch, the job market has held up better than many anticipated.
Early this month, the government reported that U.S. employers added 187,000 jobs in July, fewer than expected, but still a reflection of a healthy labor market. The unemployment rate dipped to 3.5%, close to a half-century low.
Job openings in June fell a tick below 9.6 million, the fewest in more than two years. However, the numbers remain unusually robust considering monthly job openings never topped 8 million before 2021.
The government updates both of those reports next week.
Besides some layoffs in the technology sector early this year, companies have mostly been trying to retain workers.
Many businesses struggled to replenish their workforces after cutting jobs during the pandemic, and sizable amount of the ongoing hiring likely reflects efforts by firms to catch up to elevated levels of consumer demand that emerged since the pandemic recession.
While the manufacturing, warehousing, and retail industries have slowed their hiring in recent months, they aren’t yet cutting jobs in large numbers. Given the difficulties in finding workers during the past two years, businesses will likely hold onto them as long as possible, even if the economy weakens.
