The number of Americans filing new applications for jobless benefits fell more than expected last week, but the uncertainty around this time of year when automakers shut down factory operations to retool makes it harder to get a clear reading on the labor market.
Initial claims for jobless benefits fell 17,000 to a seasonally adjusted 222,000 for the week ended July 6, the lowest level since late May, the Labor Department reported on Thursday. Economists polled by Reuters had forecast 236,000 claims in the latest week.
Claim data includes the Independence Day holiday. Claims tend to be volatile around the holidays, and automakers typically shut down assembly plants starting the week of July 4 to tune up new models.
However, the timing of the shutdown can vary from one manufacturer to another, which can disrupt the model used by the government to obtain data for seasonal fluctuations.
While this may inject disruption into claims data, signs are mounting that the labor market is losing momentum as the Federal Reserve's large interest rate hikes in 2022 and 2023 cool economic activity.
There were 1.22 job openings for every unemployed person in May, not much higher than the average of 1.19 in 2019. The jobless rate rose to a 2-1/2-year high of 4.1% in June from 4.0% in May. Claims since June have been stuck in the upper range of 194,000-243,000 this year.
Fed Chairman Jerome Powell this week signaled risks to the labor market, telling lawmakers that "we have seen a significant slowdown." Financial markets believe that this coupled with declining inflationary pressures opens the door for the US central bank to start cutting rates in September.
The Fed has kept the benchmark overnight interest rate in the current range of 5.25%-5.50% since last July. It has raised its policy rate by 525 basis points since 2022 to tame inflation.
The number of people receiving benefits after the first week of aid, a proxy for hiring, fell 4,000 to a seasonally adjusted 1.852 million during the week ended June 29, according to the claims report.
While the so-called continuous claims data has been boosted by a policy change in Minnesota that took effect last year that allowed non-teaching education staff to file unemployment benefits during the summer break, the high levels are also consistent with rising unemployment rates.
