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 5,000 to a seasonally adjusted 229,000 for the week ended August 23, the Labor Department said on Thursday. Economists polled by Reuters had forecast 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, the government reported in early August.

Domestic demand has also slowed considerably, 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, in a nod to rising labor market risks, but also added that inflation remained a threat. 

The Fed has kept 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 7,000 to a seasonally adjusted 1.954 million during the week ending August 16, the claims report showed. 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 because of the Trump administration's immigration crackdown is softening the impact of lackluster hiring on the unemployment rate. 

Economists said reduced labor supply suggests the economy needs to create less than 90,000 jobs per month to keep up with growth in the working population. Many expect the unemployment to edge up to 4.3% in August from 4.2% in July.

Higher continuing claims mirrored consumers' deteriorating perceptions of the labor market. A survey from the Conference Board on Tuesday showed the share of consumers viewing jobs as "hard to get" jumped to a 4-1/2-year high in August.

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