Weekly unemployment experiences fall to 233,000, lower than anticipated, a optimistic signal for the labor market
Last week, initial jobless claims fell below expectations, contradicting other signs of weakening labor market conditions.
The number of initial jobless claims this week was 233,000 on a seasonally adjusted basis, down 17,000 from the previous week's upwardly revised figure and below the Dow Jones estimate of 240,000, the U.S. Labor Department said on Thursday.
The report comes at a time when Wall Street is nervous amid signs that job growth is slowing and even a possible recession is on the horizon. Stock market futures, which were previously negative, turned sharply positive after the release at 8:30 a.m. ET, while U.S. Treasury yields remained higher.
While the peak number helped allay some fears, the number of continuing claims going back a week rose slightly to 1.875 million, the highest level since November 27, 2021.
Jobless claims have been trending upward for much of the year but still remain relatively low. The recent increase is attributed to disruptions from Hurricane Beryl as well as summer shutdowns at auto plants. Michigan and Texas reported the two biggest declines this week, 7,401 and 4,814, respectively, according to unadjusted figures.
The four-week average rose to 240,750, the highest in nearly a year. Claims rose by 14,000 the previous week, heightening concerns that more layoffs are coming.
“Applications fell last week, supporting evidence that weather and seasonal auto plant closures were responsible for the previous week's dramatic increase,” said Robert Frick, corporate economist at Navy Federal Credit Union. “If you're looking for further weakness in the labor market, you'll have to find it elsewhere.”
Concerns about the state of the labor market increased after the release of nonfarm payrolls last Friday, which showed an increase of only 114,000 jobs in July. At the same time, the unemployment rate rose to 4.3 percent, triggering the so-called Sahm rule, which measures recessions by changes in the unemployment rate.
Since then, the markets have been volatile, with a massive three-day sell-off last Thursday fueling fears of even greater problems for the U.S. economy.
In turn, traders expect the Federal Reserve to begin cutting interest rates in September. Some are even calling for an emergency cut between meetings to counteract recent weakness. Markets expect the rate cut to be half a percentage point at first and a full percentage point by year-end, according to CME Group's FedWatch tracker for fed funds futures contracts.
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