WASHINGTON – First-time applications for US unemployment benefits increased last week, while the number of people on jobless rolls rose further to a 2-1/2 year high towards the end of June, consistent with a gradual cooling in the labor market.
Ebbing labor market momentum, together with abating inflation pressures, keep the Federal Reserve on track to start cutting interest rates this year, with financial markets hopeful that the easing cycle could start in September.
Fed Chair Jerome Powell said on Tuesday that the economy was back on a “disinflationary path,” but stressed policymakers needed more data before cutting rates.
“The labor market is still historically strong, but not quite as strong as it was in 2022 and early 2023,” said Gus Faucher, chief economist at PNC Financial.
Initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 238,000 for the week ended June 29, the Labor Department said on Wednesday. The report was released a day early because of the Independence Day holiday on Thursday.
Economists polled by Reuters had forecast 235,000 claims in the latest week. Unadjusted claims increased 13,049 to 238,149.
There was a 4,509 jump in applications in New York, likely related to school holidays. Notable increases were also reported in California, New Jersey, Georgia, Illinois, Iowa, Kentucky and Michigan. These more than offset declines in Connecticut and Maryland.
Claims have moved to the upper end of their 194,000-243,000 range this year, in part because of a rise in layoffs as higher interest rates dampen demand and difficulties adjusting the data for seasonal fluctuations during holidays.
Volatility could persist after the July 4 holiday. Auto manufacturers typically idle assembly plants for retooling in the summer, but the timing is uncertain.
The labor market is steadily cooling, with the government reporting on Tuesday that there were 1.22 job openings for every unemployed person in May. The vacancy-to-unemployment ratio is close to its average of 1.19 in 2019.
Separately on Wednesday, the ADP Employment report showed private payrolls increased by 150,000 jobs in June after rising 157,000 in May. Economists polled by Reuters had forecast private employment increasing by 160,000.
The U.S. central bank has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range since last July. The Fed has hiked its policy rate by 525 basis points since 2022 to stamp out inflation.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 26,000 to a seasonally adjusted 1.858 million during the week ending June 22, the highest level since late November 2021, the claims report showed. The so-called continuing claims data have been boosted by a policy change in Minnesota that came into effect last year allowing non-teaching educational staff to file for unemployment benefits during the summer break.
That bump should fade when schools reopen for the new academic year in the fall.
A third report on Wednesday from global outplacement firm Challenger, Gray & Christmas showed U.S.-based employers announced 48,786 jobs cuts in June, down 23.6% from May. Planned layoffs were, however, 19.8% higher compared to June last year.
The government is expected to report on Friday that nonfarm payrolls increased by 190,000 jobs in June after rising 272,000 in May, according to a Reuters survey of economists. The unemployment rate is forecast unchanged at 4.0%.
(Source: Reuters)
