Washington: Fewer Americans sought unemployment benefits last week as employers appear to be retaining workers despite a slowing economy.

Applications for jobless benefits for the week ending Aug 23 dropped 5,000 to 229,000, the Labor Department reported Thursday. Weekly claims are a proxy for layoffs and have mostly stayed in a historically healthy range of 200,000 to 250,000 since the US began emerging from the COVID-19 pandemic.

While layoffs remain low, hiring has weakened, creating what economists describe as a “no hire, no fire” economy. The unemployment rate remains at a low 4.2%. Job gains have averaged just 35,000 a month in the three months ending July, barely one-quarter of the pace a year ago.

Growth slowed to a 1.3% annual rate in the first half of the year, down from 2.5% in 2024, amid uncertainty from President Donald Trump's tariff policies. The sluggish job market partly influenced Federal Reserve Chair Jerome Powell to signal a possible interest rate cut at the next meeting on Sept 16-17, which could lower borrowing costs for mortgages, auto loans, and businesses.

The Labor Department also reported that the four-week average of claims rose by 2,500 to 228,500. The total number of Americans collecting unemployment benefits for the week of Aug 16 fell 7,000 to 1.95 million, down from a near four-year high earlier this month, indicating that many out-of-work Americans are struggling to find new jobs.