A slightly higher-than-expected number of Americans filed for unemployment last week, according to the latest initial jobless claims data. But it was fewer overall than the surge seen in the previous week.
The Labor Department reported on Thursday that there were 238,000 new unemployment insurance claims filed during the week of June 15. Economists surveyed by FactSet were expecting claims to hit 235,000.
Claims in the most recent week declined by 5,000 from the previous week’s revised level of 243,000, the highest level in 10 months.
With the latest week of data, the four-week moving average of claims is now 232,750. Prior to June, the four-week moving average had largely trended below 215,000 since February. If higher levels persist, that could point to a sustained softening in the labor market and prompt the Federal Reserve to speed up the timetable on interest rate cuts.
The level of continuing claims was 1,828,000 for the same period, rising by 15,000 from the previous week and above estimates of 1,821,000.
Advertisement – Scroll to Continue
Using last year’s pattern as a model, there might be a stretch of several weeks in which new claims notch elevated levels, wrote Santander’s chief economist Stephen Stanley before the report.
Yet, other data and survey results show that many businesses are trying to reduce labor costs, which could result in a sustained softening of the workforce. Although payroll growth was strong in May, Morgan Stanley’s chief U.S. economist, Ellen Zentner, believes the risks to employment growth have risen.
She noted before Thursday’s release that the recent rise in jobless claims is similar to last year’s increase at the start of the summer, after which payroll growth decelerated from a monthly average of 274,00 in the second quarter to 218,000 a month in the third quarter.
Advertisement – Scroll to Continue
If there is continued upward momentum in jobless claims, it could prompt the Fed to reassess its timetable for interest rate cuts. Historically, the decision to cut rates has been most sensitive to the unemployment rate and jobless claims, writes Jan Hatzius, Goldman Sachs’ chief economist.
“Fed officials have recently highlighted the importance of monitoring both closely, though most appear less concerned so far,” Hatzius said. “But moderate further labor market softening could make downside risks a more central part of the case.”
Write to Megan Leonhardt at megan.leonhardt@barrons.com
