US Weekly Jobless Claims Drop Calms Market Fears

• The number of Americans filing new applications for unemployment benefits fell more than expected last week, calming fears the labour market was unraveling and reinforcing that a gradual softening remains intact.
• Initial claims for state unemployment benefits fell 17,000 to a seasonally adjusted 233,000 for the week ended Aug. 3, the Labour Department said on Thursday, the largest drop in about 11 months. Economists polled by Reuters had forecast 240,000 claims for the latest week.
• It also adds more evidence to the possibility that the severity of last week's worse-than-expected monthly payrolls report for July was partly an outsized blip due to the record number of people unable to work because of bad weather.
• Claims have been on a roughly upward trend since June, with part of the rise blamed on volatility related to the motor vehicle plant shutdowns for retooling and disruptions caused by Hurricane Beryl in Texas. Unadjusted claims dropped 13,589 to 203,054 last week.
• Over the past few weeks, overall claims have been hovering near the high end of the range this year, but layoffs remain generally low. Government data last week showed the layoffs rate in June was the lowest in more than two years. The slowdown in the labor market is being driven by less aggressive hiring as the Fed's interest rate hikes in 2022 and 2023 dampen demand.
• The Fed also closely monitors how jobless rolls compare to the size of the labor force to gauge the health of the jobs market. Growth in the labor force has largely kept pace with the gradual rise of those claiming jobless relief and is about where it was before the coronavirus pandemic.

(Source: Reuters)