According to the latest initial unemployment claims data, the number of Americans applying for unemployment last week was slightly higher than expected. But it was overall lower than the increase seen in the previous week.
The Labor Department reported Thursday that 238,000 new unemployment insurance claims were filed during the week of June 15. Economists surveyed by FactSet had expected the number of claims to reach 235,000.
Claims in the most recent week fell by 5,000 from the previous week’s revised level of 243,000, the highest in 10 months.
According to the latest week's data, the four-week moving average of claims is now 232,750. Before June, the four-week moving average had been largely below 215,000 since February. If the high levels continue, it could signal continued softness in the labor market and prompt the Federal Reserve to accelerate its timetable for cutting interest rates.
The level of continuing claims for the same period was 1,828,000, up 15,000 from the previous week and above the estimate of 1,821,000.
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Ahead of the report, Santander chief economist Stephen Stanley wrote that using last year’s pattern as a model, there could be a stretch of several weeks in which new claims reach elevated levels.
Still, other data and survey results suggest that many businesses are trying to reduce labor costs, which could result in a continued softness in the workforce. Although payroll growth was strong in May, Ellen Gentner, Morgan Stanley's chief U.S. economist, believes risks to employment growth have increased.
He said ahead of Thursday's release that the recent rise in jobless claims is similar to the surge that occurred in early summer last year, after which payroll growth slowed from a monthly average of 274,000 in the second quarter to 218,000 per month in the third quarter.
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If unemployment claims continue to rise, it could prompt the Fed to reevaluate its timetable for cutting interest rates. Historically, the decision to cut rates has been most sensitive to the unemployment rate and unemployment claims, writes Goldman Sachs chief economist Jan Hatzius.
“Fed officials have recently highlighted the importance of watching both closely, though so far most officials seem less concerned,” Hatzius said. “But downside risks from further easing in the labor market may be a more important part of the case.”
Write to Megan Leonhardt at [email protected]