- Weekly jobless claims rise from 6,000 to 260,000
- Continuing claims increased from 48,000 to 1.416 million
- Trade deficit narrows 6.2% to $79.6 billion in June
WASHINGTON, Aug 4 (Reuters) – The number of Americans filing new claims for unemployment benefits rose last week, suggesting some softening in the labor market, although the overall situation remains tight.
This was underlined by other data on Thursday showing a sharp drop in layoffs announced by US-based companies in July. Still-low levels of unemployment claims and a brisk pace of support suggest that the economy is not in recession, despite GDP contracting in the first half.
“The risk is that claims continue to rise as labor market conditions gradually calm down, but we do not expect a sharp increase from current levels at any point as demand for workers outpaces supply,” Lydia Boussour, leading US economist at Oxford Economics in New York.
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The state’s initial claims for unemployment benefits rose from 6,000 to 260,000 seasonally adjusted for the week ended July 30, the Labor Department said. Economists polled by Reuters had estimated 259,000 applications for the latest week.
Some of the recent increase in claims may be the result of difficulties in adjusting the data for seasonal fluctuations. Automotive manufacturers typically close assembly plants in July for annual retooling, resulting in temporary layoffs.
But chip shortages may have constrained the timing of retooling, potentially throwing off the model that the government uses to remove seasonal fluctuations from the data.
Unadjusted claims fell by 9,825 to 205,587 last week. A large jump in filings in Connecticut was offset by significant reductions in Massachusetts, Kentucky and Ohio.
Seasonally adjusted claims broke above 230,000 in early June, reaching an eight-month high of 261,000 in mid-July. However, they are well below the range of 270,000-300,000, which economists say would signal a slowdown in the labor market.
“If initial claims start hovering around that level, it will be a cause for concern, as it will increase the risk that jobs may start falling and the unemployment rate may rise,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester. , Pennsylvania. “The rising unemployment rate sends an ominous warning of a recession.”
During the week ending July 23, the number of people receiving benefits after the initial week of aid increased by 48,000 to 1.416 million. So-called persistent claims, a proxy for recruitment, were the highest in three months.
Stocks were little changed on Wall Street. The dollar fell against a basket of currencies. US Treasury prices rose.
The economy contracted 1.3% in the first half, meeting the definition of a recession. The wildly fluctuating inventory and trade deficit tied to global supply chains have been largely attributed to two straight quarterly declines in GDP.
There were 10.7 million job opportunities at the end of June, with 1.8 for every unemployed worker.
For now, layoffs are minimal. A separate report on Thursday by global outplacement firm Challenger, Gray & Christmas showed job cuts announced by US-based companies fell 20.6% to 25,810 in July.
So far this year, employers have announced 159,021 layoffs, down 31.3% from the same period last year and the lowest since 1993 in January-July.
The job cuts this year are concentrated in the automotive, technology and financial sectors. Semiconductor shortages have disrupted the auto industry, while layoffs in the technology and financial sectors reflect cooling demand due to higher interest rates.
The Federal Reserve last week raised its policy rate by three-quarters of a percentage point. The US central bank has now raised that rate by 225 basis points since March.
“The level of job cuts is nowhere near where they were in the recessions of 2001 and 2008, although they can last,” said Andrew Challenger, senior vice president at Challenger, Gray & Christmas. “If we are in a recession, we have yet to feel it in the labor market.”
The claims data has no bearing on the July employment report, which is due to be released on Friday. According to a Reuters survey of economists, non-farm payrolls added 250,000 jobs last month after an increase of 372,000 in June.
A third Commerce Department report on Thursday showed the trade deficit narrowed 6.2% to $79.6 billion in June, as exports hit a record high. Trade was the economy’s only bright spot in the second quarter, adding 1.43 percentage points to GDP after being a drag for seven consecutive quarters.
“This provides a good basis for net exports to continue to drive GDP growth in the third quarter,” said Andrew Hunter, an economist at Capital Economics. “But with the latest survey evidence showing that weak global growth and a strong dollar are set to impact export demand in the coming months, this support may not last.”
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Reporting by Lucia Muticani Editing by Bill Rigby
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