The number of Americans filing new applications for unemployment benefits increased to an 11-month high last week, suggesting some softening in the labor market, though claims tend to be volatile around this time of the year.
Initial claims for state unemployment benefits increased 14,000 to a seasonally adjusted 249,000 for the week ended July 27, the highest level since August last year, the Labor Department said on Thursday. Economists polled by Reuters had forecast 236,000 claims for the latest week.
Claims have been on an upward trend since June, with part of the rise blamed on volatility related to temporary motor vehicle plant shutdowns for retooling and disruptions caused by Hurricane Beryl in Texas.
Though applications broke above the upper end of their 194,000-245,000 range for this year, layoffs remain generally low. Government data on Tuesday showed the layoffs rate in June was the lowest in more than two years. The slowdown in the labor market is being driven by low hiring as the Federal Reserve’s interest rate hikes in 2022 and 2023 dampen demand.
A separate report on Thursday from global outplacement firm Challenger, Gray & Christmas showing planned job cuts by U.S.-based companies dropped 47% to 25,885 in July. Companies have announced 460,530 job cuts so far this, down 4.4% from the same period last year. They, however, planned to hire 3,676 workers in July. So far this year, employers have announced plans to hire 73,596 workers, the lowest year-to-date total since 2012.
Federal Reserve Chair Jerome Powell told reporters on Wednesday that while he viewed the changes in the labor market as “broadly consistent with a normalization process,” policymakers were “closely monitoring to see whether it starts to show signs that it’s more than that.”
The U.S. central bank on Wednesday kept its benchmark overnight interest rate in the 5.25%-5.50% range, where it has been since last July, but opened the door to reducing borrowing costs as soon as its next meeting in September.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 33,000 to a seasonally adjusted 1.877 million during the week ending July 20, the claims report showed.
The claims data has no bearing on July’s employment report as it falls outside the survey period. The government is expected to report on Friday that nonfarm payrolls increased by 175,000 jobs last month after rising by 206,000 in June.
The unemployment rate is forecast unchanged at 4.1%, having risen for three consecutive months.
—Lucia Mutikani, Reuters