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Economic Report: U.S. jobless claims climb to 260,000 and stick near nine-month high

The numbers: Some 260,000 people applied for unemployment benefits at the end of July, keeping jobless claims near a nine-month high and signaling a softening in the U.S. labor market as the economy slows.

initial jobless claims increased by 6,000 from a revised 254,000 in the prior week.

Economists polled by the Wall Street Journal forecast initial jobless claims to total 260,000 in the seven days ended July 30.

New filings had fallen to as low as 166,000 in late March — the second-fewest on record — before moving higher over the past several months as the economy slowed. Some companies, mainly in technology, have also resorted to layoffs.

The four-week average of new jobless claims, which smooths out the temporary ups and downs, climbed to 254,750, the highest level since last November.

The figures are seasonally adjusted.

Big picture: The economy is slowing in response to rising interest rates.

The Federal is jacking up the cost of borrowing to try to tame the biggest outbreak of U.S. inflation in almost 41 years. Higher rates typically discourage consumers and businesses from spending and investing.

Many companies are still trying to hire, however, and their biggest labor problem is finding enough workers to fill open jobs. The strong jobs market is the economy’s biggest bulwark against recession.

Key details: Most of the increase in raw or actual jobless claims was concentrated in Connecticut, where new filings jumped by more than 7,000.

The state recently modernized its unemployment system as part of an effort to make it more efficient and to better detect fraud.

Oklahoma was the only other state to post a sizable increase. New claims fell sharply in Massachusetts and Kentucky, while most other states reported little change.

Of the 53 states and U.S. territories that report jobless claims, 32 showed a decline and 21 reported an increase.

The number of people already collecting unemployment benefits, meanwhile, increased by 48,000 to 1.42 million. While that’s still near a 50-year low, these so-called continuing claims have risen to the highest level since April.

One caveat on the increase in claims at the end of July: New filings actually fell and were just a little above 200,000 before seasonal adjustments.

The government’s data tends to be more erratic during the height of summer because of big changes in seasonal employment patterns.

Looking ahead: “Demand for labor remains quite strong. The modest pickup in claims suggests that turnover may be increasing in weaker firms that are struggling with slowing growth,” said money market economist Thomas Simons of Jefferies LLC.

“The relative stability of continuing claims suggests that workers who are let go are still having a relatively easy time finding a new job,” he wrote in a note to clients.

Market reaction: The Dow Jones Industrial Average
DJIA,
-0.25%

and S&P 500
SPX,
-0.13%

were set to open slightly higher in Thursday trades.

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