The number of Americans filing new applications for unemployment benefits fell last week, but the labor market has softened as both demand for and supply of workers have diminished.
Initial claims for state unemployment benefits decreased 33,000 to a seasonally adjusted 231,000 for the week ended September 13, the Labor Department said on Thursday. The decline partially reversed a surge in the prior week, which had pushed claims to levels last seen in October 2021.
That increase in applications was concentrated in Texas, with the state's Workforce Commission later saying it had since the September 1 Labor Day holiday "observed an uptick in identity fraud claim attempts aimed at exploiting the unemployment insurance system."
Economists polled by Reuters had forecast 240,000 claims for the latest week. Layoffs remain relatively low, but the hiring side of the labor market has almost stalled. Demand for workers has slowed, with economists blaming uncertainty stemming from tariffs on imports. At the same time, an immigration crackdown has reduced labor supply, creating what Federal Reserve Chair Jerome Powell on Wednesday described as a "curious balance."
"Typically when we say things are in balance, that sounds good," Powell told reporters. "But in this case, the balance is because both supply and demand have come down quite sharply. We now see the unemployment rate edging up."
FED CUTS RATES
The U.S. central bank on Wednesday cut its benchmark overnight interest rate by a quarter-percentage-point to a 4.00%-4.25% range and projected a steady pace of reductions for the rest of 2025 to help the labor market. The Fed paused its policy easing cycle in January because of uncertainty over the inflationary impact of President Donald Trump's import tariffs.
The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of September's employment report. Payrolls increased by only 22,000 jobs in August, with employment gains averaging 29,000 positions per month over the last three months.
The unemployment rate is near a four-year high of 4.3%. The government said last week payrolls could have been overstated by 911,000 jobs in the 12 months through March.
Though layoffs remain low, those who lose their jobs are experiencing long bouts of unemployment because of the stall-speed pace of hiring. The number of people receiving benefits after an initial week of aid fell 7,000 to 1.920 million during the week ending September 6, the claims report showed.
The average duration of joblessness jumped to 24.5 weeks in August, the longest since April 2022, from 24.1 in July.