Recent data from the US Department of Labor reveals a significant rise in weekly applications for unemployment insurance, unexpectedly climbing to the highest level observed in almost a year. Adjusted for seasonal variations, the initial claims went up by 14,000, reaching a total of 249,000 for the week ending July 27, a figure not seen since August 5, 2023.
Analysts surveyed by Bloomberg had anticipated a lower figure, with the consensus set at 236,000. Notably, the prior week’s statistics remained unchanged at 235,000, indicating a persistent upward trend in unemployment claims. The four-week moving average for initial claims also saw an increase, now standing at 238,000—an uptick of 2,500 from the previous unrevised average.
Furthermore, unadjusted claims observed a decline of 10,012 over the week, totaling 215,827. This rise in claims has been partially attributed to the impacts of Hurricane Beryl, which left over 1 million electric customers without power for several days. Thomas Simons, a US economist at Jefferies, noted the ramifications of this natural disaster on employment statistics.
Continuing claims, which reflect the number of individuals who have filed for unemployment benefits for more than one week, amounted to 1.88 million for the week ending July 20. This figure marks the highest level since November 27, 2021, surpassing the Bloomberg consensus of 1.86 million. There was also an increase of 33,000 from the previous week’s revised figure, which was adjusted downward by 7,000.
The four-week moving average for continuing claims rose to 1.86 million, increasing by 5,250 from the previous week’s downwardly revised average. Texas reported the most significant increase in initial claims for the week ending July 20, with 5,962 new applications. This was followed by Tennessee and Delaware, showing regional disparities in the job market.
Conversely, New York recorded the largest drop in claims, with a decrease of 8,091, along with Michigan and California, which saw declines of 6,941 and 5,326, respectively. On another note, the Federal Reserve announced it would maintain its benchmark lending rate following its eighth consecutive pause.
The committee cited a moderation in job growth and a slight uptick in the unemployment rate, yet it continues to adhere to historically low levels. Chairman Jerome Powell described the current labor market conditions as gradually cooling, approximating the circumstances observed in 2019. Simons echoed this sentiment, stating, "This week's claims data is consistent with this characterization in our view." Looking ahead, the Bureau of Labor Statistics is poised to release data on Friday that is expected to indicate the addition of 175,000 nonfarm jobs to the economy in July, a decline from the prior month’s increase of 206,000.
In an additional report from Challenger, Gray & Christmas, US employers eliminated 25,885 jobs last month. This figure, although reflecting a 47% decrease from June's cuts, represents a 9% increase compared to a year prior. Andrew Challenger, the company’s senior vice president, remarked, "The job market is indeed cooling, with hiring at the lowest point in over a decade.
While we are seeing increased cuts in manufacturing sectors, both consumer and industrial, most industries are cutting below last year's levels.".