The number of Americans filing new claims for jobless benefits fell more than expected last week, easing concerns that the labor market was collapsing and reinforcing the view that prospects for a soft landing remained intact.
Data released by the U.S. Department of Labor on Thursday showed that the number of initial unemployment claims in the week ended August 3 was 233,000, a seasonally adjusted decrease of 17,000, the largest drop in about 11 months. Economists surveyed by Reuters had expected the number of initial unemployment claims to be 240,000 last week.
The latest data is a welcome reversal after an unexpectedly sharp rise in initial jobless claims in the previous week, likely reflecting the fading impact of temporary shutdowns at auto plants and Hurricane Beryl. The previous reading was slightly revised up to 250,000 from 249,000.
As the U.S. initial jobless claims data eased investors' concerns about the job market, the three major U.S. stock indexes opened higher, with the Dow Jones Industrial Average up 210 points, the S&P 500 up 1.06%, and the Nasdaq up 1.4%. The benchmark 10-year U.S. Treasury yield rose back to above 4%. The U.S. dollar index also strengthened.
“The discussion about an impending recession seems off the mark,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
Interest rate futures markets show traders have reduced the probability of a 50 basis point rate cut by the Federal Reserve in September to about 60% from 70%.
Initial claims for unemployment benefits have been generally on the rise since June, partly due to shutdowns at auto plants to replace equipment and damage caused by Hurricane Beryl in Texas.
As those effects faded, initial claims for state unemployment benefits fell by 13,589 to 203,054 last week, the fewest since early June. Claims fell sharply in Michigan and Missouri, states with large numbers of auto assembly plants. Automakers typically shut down in July to retool for new models, but each manufacturer has a different schedule.
Meanwhile, data showed that continuing claims for unemployment benefits rose by 6,000 to 1.88 million in the week ended Aug. 3. The gradual increase in such claims suggests that it is taking longer for unemployed people to find new jobs.
While claims have hovered near highs for the year in recent weeks, layoffs have generally remained low, with government data last week showing the lowest layoff rate in more than two years in June.
Analysts believe that although companies are not hiring too many people, they are not laying off too many people either, which is a sign that the labor market is cooling from its hot state and becoming more normal, rather than a major shift towards serious deterioration.
Chris Larkin, managing director of trading and investing at E-Trade, said: "Today's initial jobless claims data may ease some of the concerns raised by last week's employment report. However, with inflation data due next week and the stock market still experiencing its biggest correction of the year, it is unclear to what extent this will affect market sentiment."
Article forwarded from: Jinshi Data
