U.S. Unemployment Claims Drop Amid Hurricane Aftereffects

WASHINGTON (Reuters) – The number of Americans filing new unemployment applications unexpectedly fell last week, although it may remain elevated due to Hurricane Helene and Milton, complicating the labor market outlook.

Initial claims for state unemployment benefits dropped by 19,000 to a seasonally adjusted 241,000 for the week ending October 12, according to the Labor Department.

Economists surveyed by Reuters had predicted 260,000 claims for that week. Claims had surged to over a one-year high in the previous week, attributed to Hurricane Helene, which impacted Florida and parts of the Southeast in late September.

The decrease in claims due to Helene is expected to be countered by a significant rise in claims from Hurricane Milton, which hit Florida weeks later.

Additionally, a month-long strike by around 33,000 machinists at Boeing has complicated the labor market picture, disrupting the supply chain and affecting the non-striking workforce. Boeing previously announced 17,000 job cuts amid ongoing challenges.

The claims report coincides with the government's survey of employers for the nonfarm payrolls component of October's employment report. Economists predict that Federal Reserve officials will not heavily weigh this report when they meet in early November, just days before the November 5 U.S. presidential election.

In September, nonfarm payrolls saw the largest increase in six months, while the unemployment rate fell to 4.1% from 4.2% in August. The Fed cut its benchmark interest rate by an unusually large 50 basis points last month, marking the first reduction since 2020, as concerns about the labor market rise.

Having raised its policy rate by 525 basis points in 2022 and 2023 to combat inflation, the Fed is expected to lower rates by only 25 basis points next month.

The number of people receiving benefits after the initial week of aid, a proxy for hiring, increased by 9,000 to a seasonally adjusted 1.867 million during the week ending October 5.