US jobless claims rise to 238,000 in early July

US jobless claims rise to 238,000 in early July

The number of Americans filing new claims for unemployment benefits rose last week, pointing to easing labor market conditions.

Initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 238,000 in the week ended June 29, the Labor Department reported Wednesday. The report was released a day early, due to the Independence Day holiday on Thursday. Economists polled by Reuters They had predicted 235,000 requests in the last week.

Applications have been at the high end of their range of 194,000 to 243,000 this year, partly due to a rise in layoffs, as higher interest rates dampen demand, as well as difficulties in adjusting data to seasonal fluctuations during the holidays.

Volatility could persist after the July 4 holiday. Carmakers typically shut down assembly plants in the summer, but the timing is uncertain.

The labour market continues to cool, with the government reporting on Tuesday that in May there were 1.22 job vacancies for every unemployed person. The job vacancy-to-unemployment ratio is close to its 2019 average of 1.19.

Federal Reserve Chairman Jerome Powell said Tuesday that the economy had returned to a “disinflationary path”, but policymakers needed more data before cutting rates. Financial markets remain optimistic that the US central bank could begin its easing cycle in September.

The Federal Reserve has kept its benchmark overnight interest rate in the current range of 5.25%-5.50% since July of last year. It has raised its official interest rate by 525 basis points from 2022 to end inflation.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, rose by 26,000 to a seasonally adjusted 1.858 million during the week ended June 22, the highest level since late November 2021, the claims report showed.

The so-called continuing claims data has been boosted by a policy change in Minnesota that took effect last year and that allows non-teaching staff to apply for unemployment benefits during the summer holidays.

According to a separate report released Wednesday by outplacement firm Challenger, Gray & Christmas, U.S. companies announced 48,786 layoffs in June, down 23.6 percent from May. However, the planned layoffs were 19.8% higher than in June last year.

According to a Reuters poll of economists, the government is expected to report on Friday that nonfarm payrolls rose by 190,000 jobs in June, after increasing by 272,000 in May. The unemployment rate is forecast to remain unchanged at 4%.