US weekly jobless claims rise to 11-month high
THE number of Americans filing new applications for unemployment benefits increased to an 11-month high last week, suggesting a softening in the labour market, though claims tend to be volatile around this time of the year.
The report from the Labor Department on Thursday (Aug 1) also showed the number of people on jobless rolls swelling in mid-July to the highest level since late 2021. The data could fan fears of a rapid labour market deterioration, which surfaced last month when data showed the unemployment rate rose to a two-1/2-year high of 4.1 per cent in June.
It was supportive of a September interest rate cut. Federal Reserve chair Jerome Powell told reporters on Wednesday that while he viewed the changes in the labour market as “broadly consistent with a normalisation process,” policymakers were “closely monitoring to see whether it starts to show signs that it’s more than that.”
“While the claims data have been subject to a variety of special factors in recent weeks, they are on an uptrend, suggesting some pickup in layoff activity,” said Nancy Vanden Houten, lead US economist at Oxford Economics.
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. Economists polled by Reuters had forecast 236,000 claims for the latest week.
Claims broke above the upper end of their 194,000-to-245,000 range for this year. Filings 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.
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Unadjusted claims dropped 10,012 to 215,827 last week. That was less than half of the 21,901 decline that the seasonal factors, the model used by the government to iron our seasonal fluctuations from the data, had expected.
Claims surged 4,033 in Michigan and shot up 3,352 in Missouri, states which have many motor vehicle assembly plants.
Auto makers typically shut down assembly plants starting the July four week to retool for new models, but the shutdown schedules are different for every manufacturer. Claims rose in July last year through the first half of August, before fully reversing course by early September.
Claims also increased in Massachusetts. Applications in Texas dropped 6,232 after surging in the prior two weeks because of Hurricane Beryl. There were also decreases in filings in New York, Ohio, Florida, Tennessee and South Carolina.
The Fed on Wednesday kept its benchmark overnight interest rate in the 5.25 to 5.5 per cent 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 US dollar was higher against a basket of currencies. US Treasury prices rose, with the yield on the benchmark 10-year note falling to the lowest level since early February.
Despite last week’s jump in claims, 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 labour market is being driven by low hiring as the US central bank’s rate hikes in 2022 and 2023 dampen demand.
A separate report on Thursday from global outplacement firm Challenger, Gray & Christmas showed planned job cuts by US-based companies dropped 47 per cent to 25,885 in July. Companies have announced 460,530 job cuts so far this year, down 4.4 per cent from the same period last year.
They, however, planned to hire only 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.
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 Jul 20, the highest level since November 2021, 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 per cent, having risen for three consecutive months. REUTERS
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