WASHINGTON (Reuters)

The number of Americans filing new applications for jobless benefits fell last week, but tepid hiring could raise the unemployment rate to 4.3% in August.

Initial claims for state unemployment benefits decreased by 5,000 to a seasonally adjusted 229,000 for the week ended August 23, according to the Labor Department. Economists polled by Reuters had predicted 230,000 claims for the latest week.

The labor market is stuck in a no-hire, no-fire mode amid President Donald Trump’s protectionist trade policy, which has raised the nation’s average import duty to its highest in a century. Employment gains averaged 35,000 jobs per month over the last three months compared to 123,000 during the same period in 2024, as reported by the government in early August.

Domestic demand has also slowed significantly, attributed in part to tariffs. Federal Reserve Chair Jerome Powell last week signaled a possible rate cut at the U.S. central bank’s September 16-17 policy meeting, acknowledging rising labor market risks while also noting that inflation remains a concern.

The Fed has maintained its benchmark overnight interest rate in the 4.25%-4.50% range since December.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, fell by 7,000 to a seasonally adjusted 1.954 million during the week ending August 16, as shown in the claims report. The so-called continuing claims data covered the week during which the government surveyed households for August’s unemployment rate.

A shrinking labor market pool, due to the Trump administration’s immigration crackdown, is softening the impact of muted hiring on the unemployment rate. Economists state that the reduced labor supply suggests the economy only needs to create less than 90,000 jobs per month to keep pace with growth in the working population. Many expect the unemployment rate to rise to 4.3% in August from 4.2% in July.

Higher continuing claims correlate with consumers’ declining perceptions of the labor market. A survey from the Conference Board on Tuesday indicated the share of consumers deeming jobs as “hard to get” has surged to a 4-1/2-year high in August.

Nancy Vanden Houten, lead U.S. economist at Oxford Economics, commented, “The unemployment rate has been relatively stable because layoffs are low. Going forward, slower labor force growth will also constrain the unemployment rate, masking some of the potential fissures in the labor market.”