Total initial claims for unemployment insurance fell less than expected last week, despite other signs of a weak labor market.
The U.S. Labor Department said Thursday that initial claims for state unemployment benefits reached a seasonally adjusted 233,000 last week, down 17,000 from the previous week's upwardly revised level and below the Dow Jones Industrial Average's estimate of 240,000.
The report comes amid a tense Wall Street environment amid signs of slowing job growth and even hints of a possible recession on the horizon. Stock market futures, which were negative earlier, turned sharply positive after the 8:30 a.m. ET release while Treasury yields remained elevated.
While the higher figure helped ease some concerns, the level of continuing claims, which was delayed by a week, rose to 1.875 million, the highest level since November 27, 2021.
Jobless claims have been trending higher for most of the year, though they remain relatively moderate. The recent surge has been attributed to disruptions from Hurricane Beryl as well as summer auto plant shutdowns. Michigan and Texas had the biggest declines for the week, down 7,401 and 4,814, respectively, according to the unadjusted figures.
The four-week moving average of claims rose to 240,750, the highest level in nearly a year. The previous week, claims jumped by about 14,000, adding to concerns about a surge in layoffs.
“Last week’s jobless claims fell, adding to evidence that weather and seasonal auto plant closures were behind last week’s big rally,” said Robert Frick, an economist at Navy Federal Credit Union. “If you’re looking for additional weakness in the labor market, you’ll need to find it elsewhere.”
Concerns about the state of the labor market have been heightened following Friday’s nonfarm payrolls report, which showed a gain of just 114,000 jobs in July. At the same time, the unemployment rate rose to 4.3%, triggering the so-called Sahm rule, which measures recessions by measuring changes in the unemployment rate.
Markets have been volatile since then, with a massive three-day sell-off starting last Thursday, raising fears of deeper problems in the US economy.
In contrast, traders expect the Fed to begin cutting rates in September, with some even calling for an emergency cut at an emergency meeting to counter recent weakness. Markets are pricing in a strong half-percentage-point cut for the first step and a full 1-percentage-point cut by year-end, according to CME Group’s FedWatch index of Fed funds futures contracts.
