First-time unemployment claims continued to creep up last week, rising to their highest level since November.
Initial jobless claims rose by 9,000 to 244,000 in the week ended July 9, coming in well above economists’ expectations of 235,000 claims, according to FactSet.
The four-week moving average was 235,750, an increase of 3,250 to the previous week’s average. The average has been gradually inching up since late March, as the Federal Reserve moves to tighten monetary policy in a bid to curb inflation.
“While we think the risk is for further increases in claims as economic growth slows, we don’t anticipate a sharp rise in new claims any time soon,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
Continuing claims, or the number of people already receiving unemployment benefits, were 1.331 million for the week ended July 2, a decrease of 41,000 from the previous week. This figure was below consensus estimates for 1.355 million, suggesting that while the labor market may be loosening up, it remains fairly strong. Continuing claims hovered at around
The unemployment rate held steady at 3.6% in May for the fourth straight month, according to the Labor Department. The economy added 372,000 jobs in June.
That could change, however, if fears of a recession “become a self-fulfilling prophecy” and employers slow down their hiring plans, said Bill Adams, chief economist at Comerica Bank.
So far, layoffs have been concentrated in the tech sector, which has started to ease up on hiring. Google (ticker: GOOGL ) on Wednesday told employees it was slowing the pace of hiring for the year, joining Meta Platform s ( META ) and Microsoft ( MSFT ) in scaling back.
“The modest pickup in [initial] claims suggests that turnover may be increasing somewhat as businesses see a slowdown or start to prepare for one,” wrote Jefferies economist Thomas Simons. “However, the decline in continuing claims suggests that people who are losing their jobs are still able to find another one rather quickly.”
Investors and economists will closely monitor jobless claims the next few months since they provide more immediate data on the state of the labor market that the Fed will use to guide monetary policy. As long as the labor market remains strong, the Fed will be encouraged to keep aggressively hiking rates to fulfill the second part of its dual mandate — controlling inflation.
The consumer price index rose at a 9.1% annual pace in June, the highest in over four decades. This has prompted 83% of Wall Street traders to speculate that the Fed could raise interest rates by as much as 100 basis points, or 1%, at the central bank’s July 27 meeting, according to the CME FedWatch Tool.