By Lucia Motikani
WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits rose last week, indicating some slackening in the labor market, although overall conditions remain tight.
This was confirmed by other data released on Thursday showing a sharp drop in layoffs announced by US-based companies in July. The still-low level of unemployment claims and the fast pace of employment support views that the economy is not in a recession despite the contraction of GDP in the first half.
said Lydia Bossour, US economist at Oxford Economics in New York.
The Labor Department said initial claims for state unemployment benefits rose 6,000 to a seasonally adjusted 260,000 for the week ending July 30. Economists polled by Reuters had expected 259,000 orders in the last week.
Some of the recent increase in claims may be a result of difficulties in adjusting data for seasonal fluctuations. Car manufacturers typically shut down assembly plants for retooling annually in July, which leads to temporary layoffs.
But the chip shortage could have disrupted the timing of retooling, which could throw off the model the government uses to remove seasonal fluctuations from the data.
Unadjusted claims fell 9,825 to 205,587 last week. A big jump in filings in Connecticut was prompted by significant declines in Massachusetts, Kentucky and Ohio.
Seasonally-adjusted claims exceeded 230,000 at the start of June, hitting an eight-month high of 261,000 in mid-July. However, it is still below the range of 270,000-300,000 that economists say will indicate a slowdown in the labor market.
“If initial claims start to swing around that level, that would be cause for concern, because it would increase the risk that employment would start to fall and the unemployment rate would start to rise,” said Ryan Sweet, chief economist at Moody’s Analytics in West Chester. , Pennsylvania. “Rising unemployment sends an ominous warning of a recession.”
The number of people receiving benefits after an initial week of aid rose from 48,000 to 1.416 million during the week ending July 23. The so-called continuing claims, a hiring agent, was the highest in three months.
Stocks on Wall Street were little changed. The dollar fell against a basket of currencies. US Treasury bond prices rose.
The economy contracted 1.3% in the first half, meeting the definition of a recession. The extreme fluctuations in inventories and trade deficits associated with faltering global supply chains were largely responsible for the two consecutive quarterly declines in GDP.
There were 10.7 million jobs at the end of June, with 1.8 jobs for every unemployed worker.
For now, layoffs are still very low. A separate report from global recruitment firm Challenger, Gray & Christmas showed on Thursday that job cuts announced by US-based companies fell 20.6% to 25,810 in July.
So far this year, employers have announced 159,021 layoffs, down 31.3% from the same period last year and the lowest level from January to July since 1993.
Job cuts this year have been concentrated in the automotive, technology and financial sectors. Semiconductor shortages have crippled the auto industry, while technology and financial sector layoffs reflect demand for cooling due to rising interest rates.
Last week, the Federal Reserve raised the interest rate by another three-quarters of a percentage point. The US central bank has now raised that rate by 225 basis points since March.
“Levels of job cuts aren’t anywhere near where they were in the 2001 and 2008 recessions right now, although they could rise,” said Andrew Challenger, Vice President of Challenger, Gray & Christmas. “If we’re in a recession, we still have to feel it in the labor market.”
The claims data has no bearing on the July employment report, which is due out on Friday. According to a Reuters survey of economists, non-farm payrolls likely increased by 250,000 jobs last month after rising by 372,000 in June.
A third report from the Commerce Department on Thursday showed that the trade deficit narrowed 6.2% to $79.6 billion in June as exports rose to a record high. Trade was the only bright spot for the economy in the second quarter, adding 1.43 percentage points to GDP after holding back for seven straight quarters.
“This provides an appropriate base for net exports to continue to boost GDP growth in the third quarter,” said Andrew Hunter, chief economist at Capital Economics. “But with the latest survey evidence suggesting that faltering global growth and a stronger dollar are set to hurt export demand over the coming months, this support will likely not continue.”
(Reporting by Lucia Mutikani; Editing by Bill Rigby)