WASHINGTON (Reuters) – The number of Americans filing new applications for unemployment benefits rose more than expected last week, but there has been no material shift in the labor market and the data is typically noisy in July because of summer breaks and temporary factory closures.
Initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 243,000 for the week ended July 13, the Labor Department said on Thursday. Economists polled by Reuters had forecast 230,000 claims for the latest week.
Claims dropped in the prior week, pulling further away from a 10-month high touched in early June.
Some of that decline was attributed to difficulties adjusting the data around holidays, like the U.S. Independence Day. In addition, auto makers typically shut down assembly plants starting the July 4 week to retool for new models.
But the shutdown schedules are different for every manufacturer, which can throw off the model that the government uses to smooth out the data for seasonal fluctuations. Claims rose in July last year through the first half of August, before fully reversing course by early September.
Disregarding the volatility, the labor market is cooling as the Federal Reserve’s interest rate increases in 2022 and 2023 slow demand. The unemployment rate rose to a 2-1/2-year high of 4.1% in June.
The Fed’s “Beige Book” report on Wednesday showed “employment rose at a slight pace” in early July, but noted a decline in manufacturing employment.
It said supply had improved and “labor turnover was lower, which reduced demand to find new workers,” adding that businesses “in several districts expect to be more selective on who they hire and not backfill all open positions.”
The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls portion of July’s employment report. Nonfarm payrolls increased by 206,000 jobs in June.
Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will shed more light on the state of the labor market in July. The so-called continuing claims increased 20,000 to a seasonally adjusted 1.867 million during the week ending July 6, the claims report showed.
It is getting harder for the unemployed to land new jobs relative to last year. The U.S. central bank has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range for the past year. It has hiked its policy rate by 525 basis points since 2022 to tame inflation.
Financial markets are expecting a rate cut in September followed by additional cuts in November and December.
(Reporting by Lucia Mutikani; Editing by Paul Simao and Andrea Ricci)
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