The number of Americans filing claims for unemployment benefits fell last week, supporting economists’ views that the labor market remained in a “slow-hire, slow-fire” mode, despite a sharp slowdown in job growth in June.
Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 215,000 for the week ended July 4, the Labor Department said on Thursday. Economists polled by Reuters had forecast 218,000 claims for the latest week.
Unadjusted claims increased by 9,967 to 224,583 last week, with applications surging by 8,467 in California. Filings shot up by 4,401 in Michigan and increased by 5,872 in Missouri, likely as some automakers idled assembly lines for maintenance and retooling.
General Motors and Ford Motor Company have, however, canceled summer shutdowns at many of their plants.
Overall adjusted claims have dropped after rising at the end of May and the beginning of June, with economists mostly dismissing the increase as being related to difficulties adjusting the data at the end of the school year.
Some states allow non-teaching staff to apply for unemployment benefits during the long school holidays, which can throw off the model used by the government to strip out seasonal fluctuations from the data.
Though job growth slowed sharply in June and the nonfarm payrolls count for April and May was revised lower, economists said there had been no material shift in the labor market.
No Rise In Labor Market Slack
“Claims remain low and stable, with the rise over the last couple of months probably reflecting residual seasonality, rather than an increase in labor market slack,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. “Looking ahead, layoffs likely will remain low.”
Iranian armed forces launched attacks on U.S. military infrastructure in neighboring Gulf states on Thursday following U.S. strikes on Iran’s southern coastal and eastern provinces, putting further strain on a three-week-old ceasefire agreement.
The minutes of the Federal Reserve’s June 16-17 meeting showed policymakers’ concerns about inflation mounted last month and they “generally expected labor market conditions to remain stable in the near term, with the unemployment rate staying close to current levels.”
The minutes, which were published on Wednesday, also noted that “several participants cited, however, the possibility that uncertainty related to geopolitical developments or the broader economic outlook could lead firms to reduce hiring or begin implementing layoffs.”
The Fed left its benchmark interest rate unchanged in the 3.50%-3.75% range at the June meeting, though new projections revealed a growing sentiment around a likely rate hike this year.
The number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, increased by 8,000 to a seasonally adjusted 1.814 million during the week ended June 27, the claims report showed.
The elevation in the so-called continuing claims partly reflects seasonal adjustment issues related to the school holidays. The unemployment rate fell to 4.2% in June from 4.3% in May because of people dropping out of the labor force.
“Given the seasonal pattern, we had expected continuing claims to flatten out by late June and that looks to be happening now,” said Abiel Reinhart, an economist at J.P. Morgan. “Continuing claims are running a bit lower than in 2024, which points to continued downward pressure on the unemployment rate.”
Still, sluggish hiring is also keeping many people on benefits. A Conference Board survey last week showed the percentage of consumers saying jobs were “hard to get” increased in June to the highest level since January 2021.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)
