MKM Partners Chief Economist and Market Strategist Michael Darda reacts as millions of Americans quit their jobs in June on “Make Money.”
The number of Americans who order unemployment benefits rose last week to near the highest level of the year, the latest sign that the historically tight labor market is starting to cool.
Figures released Thursday by the Labor Department showed claims for the week ended July 30 rose to 260,000 from a downwardly revised 254,000 a week earlier. That’s above 2019’s pre-pandemic average of 218,000 claims and only narrowly missed the eight-month high of 261,000 recorded in mid-July.
Continuous claims, or the number of Americans consecutively receiving unemployment benefits, rose slightly to 1.416 million in the week ended July 23, up 48,000 from the previous week’s revised level. A year ago, nearly 12.96 million Americans were receiving unemployment benefits.
For months now, the labor market has been one of the few bright spots in the economy, with the June jobs report showing the unemployment rate held at 3.6%, close to a historic low, for the fourth consecutive month.
IS THE UNITED STATES GOING INTO A RECESSION?
A “Now Hiring” sign outside a Lowe’s store in Dublin, California, USA, on Wednesday, May 11, 2022. (Photographer: David Paul Morris/Bloomberg via Getty Images/Getty Images)
But there are signs that the job market is starting to weaken, with a slew of companies including Google, Walmart, Apple, Alphabet’s Meta and Microsoft announcing hiring freezes or layoffs in recent weeks.
“Initial jobless claims rose again over the past week on an upward trajectory with no quick end in sight,” said Robert Frick, corporate economist at Navy Federal Credit Union. “Major corporations, including the nation’s largest employer, Walmart, are announcing layoffs as the economy cools.”
HOW HOUSING ACTIVATES HOT INFLATION
There are growing fears that the US economy is on the cusp of a recession as a result of the The Federal Reserve’s War on Inflation. The central bank is raising interest rates at the fastest pace in decades as it races to cool consumer prices, which rose 9.1% in June, the fastest year-on-year rise since 1981.
Policymakers approved another mega-sized rate hike of 75 basis points, triple the usual size, at their meeting last week and have since signaled they are “not close” to ending with this tightening cycle, despite signs of a slowing economy.
The cargo ship was traveling from Baltimore to Norfolk, Va., on March 13 when it ran aground just north of the Chesapeake Bay Bridge. (Jerry Jackson/The Baltimore Sun via AP/AP Newsroom)
The jobless claims data comes a day before the Labor Department releases its most closely watched July jobs report, which is expected to show the economy added 250,000 jobs last month. Meanwhile, the unemployment rate was likely to hold steady at 3.6 percent, according to projections by economists at Refinitiv.
In other economic news, the Commerce Department reported Thursday that the U.S. trade deficit narrowed 6.2% in June to $79.6 billion, thanks to an increase in energy product shipments and a decrease in consumer demand for imports. It is the first time since 2021 that the deficit fell below $80 billion.
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