US weekly jobless claims rise moderately; layoffs drop to 11-month low.
US weekly jobless claims rise moderately; layoffs drop to 11-month low.
US Unemployment Claims Rise Slightly, But Labor Market Remains Solid
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The number of Americans filing new claims for unemployment benefits rose slightly last week, but it’s not all doom and gloom in the labor market. In fact, layoffs have dropped to an 11-month low in July, indicative of tight labor market conditions.
According to the Labor Department, initial claims for state unemployment benefits increased by 6,000 to a seasonally adjusted 227,000 for the week ended July 29. Economists polled by ANBLE predicted 227,000 claims for the latest week, highlighting the accuracy of their forecast.
The presence of the COVID-19 pandemic and a series of interest rate hikes by the Federal Reserve since March 2022 haven’t seriously weakened the labor market. In fact, claims hover at the lower end of their 194,000-265,000 range for the year. This positive development is partially due to challenges in adjusting the data for seasonal patterns, such as automakers idling plants in July to retool for new models. The irregular timing of these plant closures can sometimes affect the accuracy of the data used to eliminate seasonal fluctuations.
Despite occasional layoffs in technology and finance sectors, the overall labor market remains robust. Employers are holding on to workers, having struggled to find labor during the pandemic. Small businesses, in particular, are increasing headcount after grappling with competition from larger enterprises that snapped up available workers.
This strength in the labor market, along with receding inflation, is fueling optimism that the economy could avoid a recession.
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Tracking Continuation of Benefits
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased by 21,000 to 1.7 million during the week ending July 22, as reported by the claims report. These continuing claims remain historically low, indicating that some laid-off workers are experiencing short spells of unemployment.
The Labor Department also revealed in its report that there were 1.6 job openings for every unemployed person in June, a figure remaining relatively stable from May. However, it’s important to note that the claims data have no bearing on the upcoming employment report for July, scheduled to be released on Friday.
Job Growth Projections and Positive Data
According to a survey conducted by ANBLEs, nonfarm payrolls likely increased by 200,000 jobs in July, following a rise of 209,000 in June. The unemployment rate is expected to remain unchanged at 3.6% in July.
Although a survey from the Institute for Supply Management showed a decline in manufacturing employment to a three-year low in July, other data sources continue to support the notion of solid gains in payrolls. The ADP’s national employment report in July indicated strong private hiring, and the Conference Board’s consumer confidence survey demonstrated widespread optimism about the labor market among households.
This positive sentiment is further reinforced by a separate report from global outplacement firm Challenger, Gray & Christmas, which highlighted that U.S.-based employers announced merely 23,697 cuts in July, the lowest figure since August 2022. Layoffs were down by 42% compared to June.
Andy Challenger, Senior Vice President at Challenger, Gray & Christmas, commented on the situation, saying, “Companies, weary of letting go of needed workers, are finding other ways to cut costs. Many have slowed hiring.”
Overall, while there has been a slight increase in unemployment claims, the labor market remains solid, indicating a positive outlook for the economy. With ongoing job growth projections and various positive data, it seems that the US economy is on track to weather any potential storms on the horizon.
