Just days later, on Thursday, the Labor Department announced that initial claims for unemployment insurance fell back to 218,000 for the week ending September 20. That’s great news the job market is tightening, right? This net change represents a decline of 14,000 from the revised total last week. It is a big miss from the Dow Jones consensus estimate of 235,000. The drop in new claims further indicates that employers are continuing to be cautious about cutting employees loose. This hesitation continues despite a major slowdown in the hiring rate.
Continuing claims fell as well, totaling 1.926 million, a decrease of 2,000 from the previous week. Employers remain unwilling to fire their mates. This reluctance could be a sign of expecting the economy to improve in the months ahead, despite the recent drop in hiring activity.
The claims report follows a decision by the Federal Reserve to lower its benchmark borrowing rate to a range of 4%-4.25% just one week prior. In its post-meeting statement on September 17, the Federal Open Market Committee pointed to increasing downside risks to employment. This new-found uncertainty has raised fears about the fragility of the current labor market.
Texas has shown great volatility in claims data over the past weeks. Specifically, after not filing any adjustment to speak of all summer, the state had a drop of almost 7,000 filings last week according to unadjusted numbers. These data provide important perspectives on industry employment trends at the regional level. As analysts are already cautioning, claims data can be very volatile and may not actually reflect the real state of the economy.
The new report shares some very good news — a related drop of 0.5 percentage points. This change is a result of an upward revision of consumer spending by the Bureau of Economic Analysis. This confusing upward adjustment goes on top of that to cast an even bigger shadow over what’s really happening in today’s labor market.
Even with these complications, the drop in initial claims seems to ease fears about a developing labor market weakness. The surprisingly low number adds weight to the argument that most businesses are looking to maintain their current workforce. They are doing this despite the fact that the economic environment is shifting.