The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting another month of strong job growth as the labor market remains tight.
Initial claims for state unemployment benefits dropped 13,000 to a seasonally adjusted 198,000 for the week ended Oct. 14, the Labor Department said on Thursday. Economists polled by Reuters had forecast 212,000 claims for the latest week.
Though the labor market is gradually cooling, conditions remain tight, with claims hovering in the lower end of their range of 194,000 to 265,000 for this year.
So far there has been a limited impact from the United Auto Workers (UAW) strikes, which have disrupted supply chains. Ford Motor (F.N), General Motors (GM.N) and Chrysler-parent Stellantis (STLAM.MI) have furloughed and laid off thousands of non-striking workers.
The Federal Reserve's Beige Book report on Wednesday said "labor market tightness continued to ease across the nation" in early October and implied cooling wage pressure. According to the Beige Book "several districts reported improvements in hiring and retention as candidate pools have expanded," but also noted that "most districts still reported ongoing challenges in recruiting and hiring skilled tradespeople."
The labor market is showing strength despite the U.S. central bank raising its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range since March 2022. It is driving consumer spending and the overall economy, ultimately keeping inflation elevated, leading many economists to expect that the Fed could leave interest rates higher for longer.
The claims report covered the week during which the government surveyed business establishments for the nonfarm payrolls component of October's employment report. Claims fell between the September and October survey periods. The economy created 336,000 jobs in September, the most in eight months.
Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will shed more light on the health of the labor market in October. The so-called continuing claims increased 29,000 to a still-low 1.734 million during the week ending Oct. 7, the claims report showed.