US weekly jobless claims hit 260,000 ahead of nonfarm payrolls report

Initial jobless claims totaled 260,000 last week, near the highest level since November amid a shift in the U.S. labor market.

The total for the week ended July 30 was in line with the Dow Jones estimate, but a gain of 6,000 from the previous week’s downwardly revised level, the Labor Department reported Thursday.

In other economic news, the U.S. trade deficit in goods and services narrowed to $79.6 billion in June, down $5.3 billion and slightly below the $80 billion estimate.

The number of jobless claims comes a day before the Bureau of Labor Statistics releases its highly anticipated nonfarm payrolls report for July. This is expected to show the US economy added 258,000 jobs during the month, down from an initial estimate of 372,000 in June and the lowest total since December 2020.

A rental sign is displayed on the window of a Chipotle restaurant in New York, April 29, 2022.

Shannon Stapleton | Reuters

“The labor market remains in good shape as the summer quarter progresses, but the rise in initial claims since early April is a cold breeze blowing through the hot labor market this summer,” said Stuart Hoffman, adviser Chief Economics Officer at PNC Financial Services.

Federal Reserve officials are watching the labor market closely for clues about an economy that is posting the highest rate of inflation in more than 40 years.

Unemployment insurance claims were hovering around their lowest levels since the late 1960s, but began to rise in June as inflationary pressures mounted and businesses began to cut hiring. Even with robust hiring in 2021 and the first half of 2022, the total employment level is 755,000 lower than it was in February 2020, the last month before the Covid pandemic hit.

The four-week moving average of unemployment insurance claims, which dampens weekly volatility, reflects the evolution of the labor market. That number rose by 6,000 from the previous week to 254,750, up sharply from the recent low of 170,500 on April 2 and the highest level of the year.

Continuing claims, which are a week behind the overall figure, totaled 1.42 million, up 48,000 from the previous week and 83,000 from the start of July.

Trade deficit hits record high

On the trade side, the lower deficit reflects a return to a more normal environment after the United States’ deficit with its global trading partners hit a record $107.7 billion in March.

Exports increased by $4.3 billion while imports decreased by $1 billion. However, the goods deficit with China increased by $4.7 billion to just under $37 billion. Imports of motor vehicles, parts and engines fell by $2.7 billion, while capital goods increased by almost $1 billion.

Even with the deficit narrowing in June, it is still 33.4% higher than a year ago as domestic supply failed to keep up with strong demand. This fueled an inflation rate at its highest level since the early 1980s.

The Federal Reserve has instituted a series of four interest rate hikes this year totaling 2.25 percentage points, in part to curb some of that pandemic-era demand. New inflation figures will be released next week, after June’s consumer price index posted a 9.1% year-over-year increase.

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