Government data last week showed the rate of layoffs in June was the lowest in more than two years. The labor market slowdown is due to less aggressive hiring as the Federal Reserve's interest rate hikes in 2022 and 2023 dampen demand.

The number of Americans filing new claims for unemployment benefits fell more than expected last week, suggesting that fears that the labor market is collapsing were overblown and that its gradual weakening remains intact.

Initial claims for state unemployment benefits fell by 17,000 to a seasonally adjusted 233,000 in the week ended Aug. 3, the Labor Department reported Thursday, the biggest drop in about 11 months.

Economists polled by Reuters had forecast 240,000 claims for the latest week.

Claims have been trending somewhat upward since June, with some of the increase attributed to volatility related to temporary closures of motor vehicle factories for retooling and disruptions caused by Hurricane Beryl in Texas.

In recent weeks, jobless claims have been at the high end of this year's range, but layoffs remain generally low.

Government data last week showed the rate of layoffs in June was the lowest in more than two years. The labor market slowdown is due to less aggressive hiring as the Federal Reserve's interest rate hikes in 2022 and 2023 dampen demand.

The US central bank last week kept its benchmark overnight interest rate between 5.25% and 5.50%, where it has been since July last year, but monetary policymakers signaled their intention to reduce costs of debt at its next meeting in September.

However, the government's monthly nonfarm payrolls report last Friday showed that employment growth slowed noticeably in July and the unemployment rate rose to 4.3%, raising fears in markets that the labor market is deteriorating at a rate that would require forceful action from the Fed.

Interest rate futures contracts currently reflect a roughly 70% chance that the Fed will begin cutting borrowing costs next month with a larger-than-usual reduction of 50 basis points.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, rose by 6,000 to a seasonally adjusted 1.875 million during the week ending July 27, the claims report showed.