WASHINGTON (AP) — Fewer Americans sought unemployment benefits last week as employers appear to be holding onto their workers even as the economy has slowed.

Applications for unemployment benefits for the week ending Aug. 23 dropped 5,000 to 229,000, the Labor Department reported Thursday.

Measures of the job market are being closely watched on Wall Street and by the Federal Reserve as the most recent government data suggests hiring has slowed sharply since this spring. Job gains have averaged just 35,000 a month in the three months ending in July, barely one-quarter what they were a year ago.

Weekly applications for jobless benefits are seen as a proxy for layoffs and have mostly settled in a historically healthy range between 200,000 and 250,000 since the U.S. began to emerge from the COVID-19 pandemic more than three years ago.

While layoffs are low, hiring has also weakened as part of what many economists describe as a “no hire, no fire” economy. Still, the unemployment rate remains a low 4.2%.

Growth has weakened so far this year as many companies have pulled back on expansion projects amid the uncertainty surrounding the impacts of President Donald Trump’s tariff policies. Growth slowed to a 1.3% annual rate in the first half of the year, down from 2.5% in 2024.

The sluggishness in the job market is a key reason that Federal Reserve Chair Jerome Powell signaled last week that the central bank may cut its key interest rate at its next meeting Sept. 16-17. A cut could reduce other borrowing costs in the economy, including mortgages, auto loans, and business loans.

The Labor Department’s report also showed that the four-week average of claims, which softens some of the week-to-week swings, rose by 2,500 to 228,500.

The total number of Americans collecting unemployment benefits for the previous week of Aug. 16 fell 7,000 to 1.95 million, down from nearly a four-year high reached earlier this month. The stubbornly high number of people continuing to collect jobless aid suggests that once out of work, many Americans are having trouble finding new jobs.