Seasonally adjusted initial jobless claims fell more than expected, according to the weekly survey from the Department of Labor. Initial jobless claims fell to 235,000 for the week ending July 20th, marking a decrease of 10,000 from the previous week’s revised level. This drop surpassed economists’ expectations, who had anticipated claims to be around 238,000.
Continuing Claims Also Decline
Continuing claims also saw a reduction, falling to a seasonally adjusted 1,851,000 for the week ending July 13th. This represents a decrease of 9,000 from the previous week’s revised level. Despite the decline, continuing claims remain close to two-year highs, underscoring ongoing challenges in the labor market.
Persistent High Average
The four-week average of jobless claims has remained above 230,000 for the sixth straight week, a trend not seen since August 2023. This persistent high average indicates a labor market that is steadily cooling.
Expert Concerns
Former New York Federal Reserve President William Dudley highlighted concerns about the labor market in an op-ed on Wednesday, calling for a rate cut in July. Dudley noted that the “the three-month average unemployment rate is up 0.43 percentage point from its low point in the prior 12 months — very close to the 0.5 threshold that, as identified by the Sahm Rule, has invariably signaled a US recession.”
Big Picture
While the decline in jobless claims this week is a positive development, it is crucial to consider the broader context. The labor market continues to show signs of cooling, with ongoing high levels of continuing claims and a persistently elevated four-week average. Monitoring these trends will be essential in assessing the current situation, strong economic growth and a cooling labor market, and what impact that will have on the Fed’s decision next week.
