- Weekly jobless claims fall 2,000 to 250,000
- Claims for week ended Aug. 6 revised sharply down
- Continuing claims increase 7,000 to 1.437 million
The number of Americans submitting new claims for unemployment benefits dropped last week and data for the previous period was sharply amended, indicating labor market conditions remain tight, though larger interest rates are weakening momentum.
In that context, the weekly unemployment claims report from the Labor Department on Thursday added to a robust industrial production last month and underlying retail sales to diminish fears that the economy was in recession. The claims report, the timeliest data on the economy’s health, could provide the Federal Reserve ammunition to implement another huge rate rise in September.
Mahir Rasheed, a U.S. economist at Oxford Economics in New York, stated:
“Fears of broad-based layoffs have yet to materialize. Still, we doubt claims will accelerate sharply as labor demand remains well ahead of labor supply, while the outlook for the economy remains relatively positive despite elevated uncertainty regarding inflation and growth.”
Initial claims for state unemployment benefits dropped 2,000 to a seasonally adjusted 250,000 for the week ended Aug. 13. Data for the previous week was altered to show 10,000 fewer claims submitted than previously published. Economists surveyed by Reuters had expected 265,000 applications for the latest week.
The bulky revision and last week’s small fall brought in claims well under the 270,000-300,000 range that economists say would indicate a significant slowdown in the labor market. Unadjusted claims dropped 4,536 to 191,834 last week. An increase in applications in Massachusetts was offset by pronounced declines in Texas, California, Georgia, and Ohio.
Companies in the interest rate-sensitive technology and housing industries have been dismissing employees in response to dampening demand caused by the Fed’s aggressive monetary policy tightening campaign to curb inflation. But elsewhere, businesses are in need of workers. There were 10.7 million job vacancies at the end of June, with 1.8 vacancies for each unemployed worker.
The U.S. central bank is anticipated to hike its policy rate by between 50 and 75 basis points in September. The Fed has hiked this rate by 225 basis points since March.
Minutes of the July 26-27 policy meeting posted on Wednesday showed that though Fed officials “observed that the labor market remained strong,” many also noted, “there were some tentative signs of a softening outlook for the labor market.”
Christopher Rupkey, chief economist at FWDBONDS in New York, explained:
“The coast is clear for Fed officials to keep on pushing on interest rates to slow the economy because the earliest indicators showing distress in the labor market are not definitive on whether a recession is weeks away or months away or even coming at all.”
Last week’s claims data covered the period during which the government polled businesses for the nonfarm payrolls portion of this month’s employment report. Claims declined between last month’s and this month’s survey periods. The economy provided 528,000 jobs last month.
Data next week on the number of people getting benefits after an initial week of aid will explain job growth prospects for this month. The so-called continuing claims, an alternate for hiring, rose 7,000 to 1.437 million in the week ending August 6.