The number of Americans filing new claims for unemployment benefits fell for a second straight week, as labor market conditions remained tight despite the Federal Reserve’s aggressive interest rate hikes.
Initial claims for state unemployment benefits decreased by 10,000 to a seasonally adjusted 230,000 for the week ended Aug. 19, the Labor Department said on Thursday. 1,000 claims revised up the previous week’s level. Economists polled by Reuters had forecast 240,000 claims for the latest week.
Economists have anticipated a downturn in the labor market since the Fed began increasing rates in March 2022, and some have been bracing for a measurable increase in unemployment claims in the wake of the recent collapse of Yellow (OTC:YELLQ) trucking company, which has about 30,000 workers.
But the anticipated shock hasn’t arrived, and the labor market continues defying expectations as employers hoard workers after struggling to find labor during the COVID-19 pandemic. Labor market strength and a slowdown in inflation are fanning optimism that the economy could avoid a recession.
“What a difference six months makes. Jobless claims were flashing yellow and red lights about the pace of expansion in the winter and spring, but are back to green this summer,” Bill Adams, chief economist at Comerica (NYSE:CMA) Bank, said in a statement.
The claims report showed that the number of people receiving benefits after an initial week of aid, a proxy for hiring, decreased by 9,000 to 1.702 million during the week ending Aug. 12. These so-called continuing claims remain low by historical standards, indicating that some laid-off workers are experiencing short spells of unemployment.
A separate report released by the Commerce Department on Thursday showed a modest rise in new orders for key U.S.-manufactured capital goods in July, suggesting business spending on equipment could continue to grow after rebounding in the second quarter.
Orders for non-defense capital goods, excluding aircraft, a gauge of business spending plans, rose 0.1%, but the figure for June was revised to show a drop of 0.4% instead of the previously reported 0.1% increase.
The revision suggested that higher borrowing costs may have weighed on corporate budgets.
Shipments of core capital goods slipped 0.2% in July after falling 0.1% in June. Non-defense capital goods shipments including aircraft fell 1.1%. These feed into calculating equipment spending in the gross domestic product measurement.
The government said the economy grew at a 2.4% annualized rate in the second quarter in its advance estimate of GDP, exceeding expectations that growth would slow due to the sharp rise in interest rates.
The combined slowdown in inflation and a relatively resilient job market prompted many economists to revise higher their expectations for GDP growth through the end of this year and into 2024.