Weekly job claims in the US registered a significant fall last week, calming apprehensions about a weakening of the labour market in the country.
The latest data is also seen as a reinforcement of a gradual softening of the US economy.
Initial claims for state unemployment benefits fell 17,000 to a seasonally adjusted 233,000 for the week ended August 3, the Labor Department said on Thursday, Reuters reported.
This is the largest drop in about 11 months.
It was a welcome reversal after last week’s surprise sharp jump in jobless claims, and most likely reflects a fading in the impact from temporary motor vehicle plant shutdowns and Hurricane Beryl.
The prior week’s tally was revised up slightly to 250,000 from the previously reported 249,000.
It also adds more evidence to the possibility that the severity of last week’s worse-than-expected monthly payrolls report for July was partly an outsized blip due to the record number of people unable to work because of bad weather.
Unemployment Insurance Weekly Claims
— U.S. Department of Labor (@USDOL) August 8, 2024
Initial claims were 233,000 for the week ending 8/3 (-17,000).
Insured unemployment was 1,875,000 for the week ending 7/27 (+6,000).https://t.co/ys7Eg5LKAW pic.twitter.com/Xx2jj1vzMG
Market reactions
US stocks gained following the release, while benchmark Treasury yields rose back above 4 percent.
The US dollar also strengthened against a basket of currencies.
“The talk of an imminent recession seems wide of the mark,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
Investors in interest rate futures contracts pared bets the Federal Reserve will start cutting borrowing costs next month with a bigger-than-usual 50-basis-point reduction to about a 58 percent probability from 70 percent before the release.
Labour market trends
Unemployment claims in the US have been on a roughly upward trend since June, with part of the rise blamed on volatility related to the motor vehicle plant shutdowns for retooling and disruptions caused by Hurricane Beryl in Texas.
Unadjusted claims dropped 13,589 to 203,054 last week.
Over the past few weeks overall claims have been hovering near the high end of the range this year, but layoffs remain generally low.
Government data last week showed the layoff rate in June was the lowest in more than two years.
The slowdown in the labour market is being driven by less aggressive hiring as the Fed’s interest rate hikes in 2022 and 2023 dampen demand.
The Fed also closely monitors how jobless rolls compare to the size of the labour force to gauge the health of the jobs market.
Growth in the labour force has largely kept pace with the gradual rise of those claiming jobless relief and is about where it was before the coronavirus pandemic.
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