Latest jobless claims data show that the filings for unemployment benefits dropped to a four-month low last week, indicating that the job market may have started to gain better ground in September.
The Labor Department released data on Thursday, showing that claims for state unemployment benefits dropped by 12,000 from the previous week's revised level, resulting in a seasonally adjusted figure of 219,000 for the week ending Sept. 14. The economists that Reuters polled initially pegged the number to be at 230,000.
The advance number for seasonally adjusted insured unemployment during the week ending Sept. 7 was 1,829,000, down 14,000 from the previous week's revised level.
The number of unadjusted claims, however, saw a small increase of 6,436, reaching 184,845 last week. California, New York and Texas saw noticeable increases that more than offset a decrease of 2,055 in Massachusetts.
On Wednesday, the Federal Reserve cut interest rates by 50 basis points to a range of 4.75% to 5.00%. This is the first reduction in borrowing costs in four years. According to Fed Chair Jerome Powell, the reduction was meant to show the commitment of policymakers to sustain better unemployment rates.
The Fed also signaled more cuts before the end of the year and rate cuts continuing into 2025.
Carl Weinberg, the chief economist at High Frequency Economics, told Reuters report that the high numbers confirm the message that Powell delivered.
"The labor market is softening but not imploding as you would expect in a recession. Fed policy is aimed at supporting the job market before a recession shapes up," Weinberg added.
Several economists put the blame on the automobile industry, which faced a number of temporary plant shutdowns.
The much talked about furloughs that are happening at Boeing are also expected to increase the number of claims in the coming weeks.
Boeing released a statement on Wednesday saying it would temporarily furlough tens of thousands of employees. It also mentioned it will include "a large number of U.S.-based executives, managers and employees."
This happened after approximately 30,000 machinists went on strike, which put to a halt the production of the 737 MAX and other planes.
Woes over deteriorating conditions in the job market such as lower availability of job openings, and curtailed hiring by firms hits the economy hard. The only silver lining is that the number of layoffs remained relatively low, which helps in steadying the economy, with a big thanks to stable consumer spending.
For the third-quarter, economic growth estimates were around 3.0% annualized rate. In the second quarter, the economy grew at 3.0% pace, which was higher than the 1.8% that Fed officials saw.
