Initial claims for jobless insurance rose to 260,000 last week, near the highest level since November amid a shift in the US labor market.
The total for the week ended July 30 was in line with the Dow Jones estimate, but a gain of 6,000 from the previous week’s downwardly revised level, the Labor Department reported Thursday.
In other economic news, the US trade deficit in goods and services narrowed to $79.6 billion in June, $5.3 billion below and slightly below the $80 billion estimate.
The number of jobless claims comes a day before the Bureau of Labor Statistics releases its long-awaited nonfarm payrolls report for July. This is expected as the US economy added 258,000 positions during the month, compared to June’s initial estimate of 372,000 and the lowest total since December 2020.
On April 29, 2022, a for-hire sign is posted in the window of a Chipotle restaurant in New York.
Shannon Stapleton | Reuters
“The labor market remains in good shape as the summer term progresses, but the increase in initial claims since early April is a cool breeze blowing into the hot labor market this summer,” Stuart said Hoffman, senior economic advisor at PNC Financial Services.
Federal Reserve officials are watching the labor market closely for clues about an economy that is showing the highest rate of inflation in more than 40 years.
Jobless claims had been hovering around their lowest levels since the late 1960s, but began to rise in June as inflationary pressures mounted and companies began to cut back on hiring. Even with robust hiring in 2021 and the first half of 2022, the total employment level is 755,000 below where it was in February 2020, the last month before the Covid pandemic hit.
The four-week moving average of jobless claims, which smooths out weekly volatility, reflects the shift in the labor market. That number rose 6,000 from the previous week to 254,750, a sharp increase from a recent low of 170,500 on April 2 and the highest level of the year.
Continuing claims, a week behind the headline number, totaled 1.42 million, up 48,000 from the previous week and up 83,000 since early July.
On the trade front, the lower deficit reflects a shift toward a more normal environment after the U.S. deficit with its global trading partners hit a record $107.7 billion in March.
Exports increased by $4.3 billion while imports decreased by $1 billion. However, the goods deficit with China widened by $4.7 billion to about $37 billion. Imports of vehicles, auto parts and engines decreased by $2.7 billion, while capital goods increased by nearly $1 billion.
Even with the reduction in the deficit in June, it is still 33.4% higher than a year ago, as domestic supply has not been able to keep pace with strong demand. This has fueled an inflation rate at its highest level since the early 1980s.
The Federal Reserve has instituted a series of four interest rate hikes this year totaling 2.25 percentage points, in part an effort to curb some of that pandemic-era demand. New inflation figures will be released next week, after June’s consumer price index showed a 12-month rise of 9.1%.