Applications for unemployment benefits in the U.S. are declining as the labor market continues to expand

The Labor Department reported Thursday that jobless claims for the week ending May 18 fell by 8,000 to 215,000, down from 223,000 the week before.

The four-week average for claims, which smooths out some of the week-to-week volatility, rose modestly from 1,750 to 219,750.

Weekly unemployment claims are considered a proxy for the number of U.S. layoffs in a given week and a sign of the direction the labor market is heading. They have remained at historic lows since millions of US job losses occurred in the spring of 2020 due to the Covid-19 pandemic.

Beginning in March 2022, the Federal Reserve raised its benchmark lending rate 11 times in an attempt to tame four-decade high inflation that persisted after the economy rebounded from the COVID-19 recession in 2020. The Fed’s intention was to ease market conditions market performance and slowdown in wage growth, which may fuel inflation.

Many economists believed there was a risk that rapid increases in interest rates could cause a recession, but jobs remained plentiful and the economy remained strong thanks to strong consumer spending.

U.S. employers added just 175,000 jobs in April, the fewest in six months, meaning the labor market may finally be cooling. The unemployment rate rose again to 3.9% from 3.8% and has now remained below 4% for 27 straight months, the longest streak since the 1960s.

The government also recently announced that there were 8.5 million job offers in March, which is the lowest number of vacancies in three years.

A moderation in the pace of hiring, combined with a slowdown in wage growth, could give the Fed the data it is looking for to ultimately issue an interest rate cut. A cooler consumer inflation reading in April could also influence the Fed’s next rate decision.

Although layoffs remain low, companies have recently announced more layoffs, mainly in the technology and media areas. Google’s parent company, Alphabet, Apple and eBay recently announced layoffs.

Outside of tech and media, Walmart, Peloton, Stellantis, Nike and Tesla have recently announced job cuts.

A total of 1.79 million Americans received unemployment benefits in the week ending May 11. This is an increase of 8,000 compared to the previous week and an increase of 84,000 compared to the same time a year ago.