Workers Wait Longer For Jobs As Hiring Freezes Offset Falling Jobless Claims

Layoffs have remained generally low, though economic uncertainty stemming from trade policy has left companies hesitant to increase hiring.

The number of Americans filing new applications for jobless benefits fell last week, pointing to steady job growth in July, though some laid off workers are experiencing long spells of unemployment because of a moderation in hiring.

Initial claims for state unemployment benefits dropped 7,000 to a seasonally adjusted 221,000 for the week ended July 12, the Labor Department said on Thursday. Economists polled by Reuters had forecast 235,000 claims for the latest week.

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Motor vehicle assembly plant closures for reasons including maintenance and annual retooling for new models could be influencing the data. Auto manufacturers typically idle assembly lines in summer, though the timing often varies, which could throw off the model that the government uses to strip out seasonal fluctuations from the data.

Layoffs have remained generally low, though economic uncertainty stemming from trade policy has left companies hesitant to increase hiring. President Donald Trump last week announced higher duties would come into effect on August 1 for imports from a range of countries, including Mexico, Japan, Canada and Brazil, and the European Union.

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Trump in April slapped a 10% duty on nearly all imports, while giving nations a 90-day period to negotiate trade deals.

The Federal Reserve’s Beige Book report on Wednesday described hiring as having “remained generally cautious” in early July, attributed by many of the U.S. central bank’s contacts to “ongoing economic and policy uncertainty.”

The Fed said while reports of layoffs were limited in all industries, they were “somewhat more common among manufacturers.” It noted that “many contacts expected to postpone major hiring and layoff decisions until uncertainty diminished.”

The claims report covered the period during which the government surveyed employers for the nonfarm payrolls component of July’s employment report. Nonfarm payrolls increased by 147,000 jobs in June, though nearly half of the positions were in the government sector, mostly state education.

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Tepid hiring is underscored by the growing number of people collecting unemployment checks. The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 2,000 to a seasonally adjusted 1.956 million during the week ending July 5. The start of a new quarter could have influenced the current level of the so-called continuing claims.

“Eligibility for benefits can be affected by calendar-quarter considerations, leading to large swings in the underlying data,” said Lou Crandall, chief economist at Wrightson ICAP.

Next week’s continuing claims data could offer more clarity on the health of the labor market in July. Economists said the elevated continuing claims reading suggested an increase in the unemployment rate. While the jobless rate fell to 4.1% in June after holding at 4.2% for three straight months, that was mostly because people dropped out of the labor force.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Nick Zieminski)