The recent drop in new unemployment benefit applications in the U.S. exceeded expectations, indicating that the labor market’s perceived instability might have been overstated. Despite a gradual softening, the labor market remains resilient.

For the week ending August 3, initial claims for state unemployment benefits fell by 17,000 to a seasonally adjusted 233,000, marking the largest decrease in nearly 11 months, according to the Labor Department. This was a significant improvement compared to the 240,000 claims forecasted by economists polled by Reuters.

Since June, there has been a general upward trend in claims, partly attributed to temporary disruptions such as motor vehicle plant shutdowns for retooling and the impact of Hurricane Beryl in Texas. Despite the increase, claims have hovered near the upper end of this year’s range, but layoffs remain relatively low.

Recent government data highlighted that the layoff rate in June was the lowest in over two years. The cooling of the labor market is primarily due to reduced hiring intensity, influenced by the Federal Reserve’s interest rate hikes in 2022 and 2023, which have tempered demand.