The number of Americans filing new applications for jobless benefits rose by the most in about three months last week. The number of people collecting unemployment relief in the prior week climbed to the highest level in nearly four years. This signals continued softness in the labor market into August.
The data may also add to the argument for the Federal Reserve to lower interest rates at its next meeting in about four weeks. Initial claims for state unemployment benefits climbed 11,000 to a seasonally adjusted 235,000 for the week ended August 16, the Labor Department said on Thursday. This was the largest increase since late May.
Economists had forecast 225,000 claims for the latest week. The data covered the survey week for the August nonfarm payrolls report from the Bureau of Labor Statistics. While it does not yet suggest large-scale layoffs are afoot, it points to another month of sub-par job growth.
“Directionally, the data show some deterioration in labor market conditions since last month, but the magnitude is limited,” said Thomas Simons, chief U.S. economist at Jefferies. “Based on this report alone, we expect August NFP will print in the 60,000 to 80,000 range.”
The labor market has split into low firings and tepid hiring as businesses navigate a complex economic landscape.
Jobless claims point to labor weakness
Job growth has averaged 35,000 jobs per month over the last three months, the government reported in early August. Domestic demand grew in the second quarter at its slowest pace since the fourth quarter of 2022. “The latest rise in claims, if sustained, would indicate some pickup in layoffs, albeit from very low levels,” Nancy Vanden Houten, lead U.S. economist at Oxford Economics, wrote in a note.
The number of people receiving benefits after an initial week of aid rose 30,000 to a seasonally adjusted 1.972 million, the highest level since November 2021, during the week ending August 9, the claims report showed. Economists said the continuing claims trend was consistent with the unemployment rate rising to 4.3% in August from 4.2% in July. The Bureau of Labor Statistics will release the August payrolls report on September 5.
This report will be closely watched for estimates of job growth and any significant revisions to the two prior months. Other data released on Thursday sent somewhat conflicting signals about the economy’s health. A monthly survey of purchasing managers at both manufacturers and services firms suggested business activity and hiring have picked up pace appreciably this month.
The prevailing view is that the Fed will lower its benchmark interest rate by a quarter of a percentage point at its September 16-17 meeting to support the job market. However, with inflation not currently on a trajectory back toward the central bank’s 2% target, officials may be hesitant to signal more cuts are coming.