The U.S. Department of Labor reported that the number of Americans filing new applications for unemployment benefits inched down last week, while data from outplacement firm Challenger, Gray & Christmas showed that layoffs soared for the entire month of August, painting a mixed picture of labor market health.
New filings for jobless benefits, a proxy for layoffs, fell by 5,000, to 227,000 for the week of Aug. 31, according to data released on Sept. 5 by the labor department. That’s less than the 230,000 new filings analysts expected and the lowest level since the week of July 6.
Initial claims have been hovering around the 230,000 mark since retreating from an 11-month high of 250,000 in late July as the temporary effects of seasonal factors in the automobile industry and Hurricane Beryl diminished.
Continuing claims, which represent the number of workers continuing to collect unemployment benefits after filing an initial claim, fell by 22,000, to 1.838 million during the week ended Aug. 24, the labor department data showed. That’s the lowest level since mid-June, with the drop in continuing claims suggesting an increase in hiring activity for that week.
“There are many signs of labor market weakness, but the jobless claims data remains very tame,” Eric Basmajian, an analyst at EPB Research, wrote in a post on X.
In contrast to the claims numbers, multiple other data points signaled labor market softness.
The Federal Reserve’s “Beige Book” report noted that unemployment levels have either ticked up slightly or been mostly stable in recent weeks as some Federal Reserve districts reported reduced shifts, unfilled job postings, and lower headcounts through attrition. Layoffs were uncommon, however, the report stated.
Also, job openings slumped to their lowest level in more than three years in July, according to the government’s Job Openings and Labor Turnover Survey, released on Sept. 4.
“There are signs of a slowdown in hiring with fewer job openings, but until payroll jobs actually decline there is no recession,” said Christopher Rupkey, chief economist at FWDBONDS.
Private payrolls rose by just 99,000 in August, according to payrolls processing firm ADP, a drop from 111,000 in July and below Dow Jones forecasts for 140,000.
“The job market’s downward drift brought us to slower-than-normal hiring after two years of outsized growth,” ADP’s chief economist, Nela Richardson, said in a statement.
Investors are bracing for the next government non-farm payrolls job creation report, due on Sept. 6, for further signals about labor market health.
Layoffs for the month of August hit their highest level for the month in 15 years—excluding the 2020 pandemic recession—according to a Challenger, Gray & Christmas report, which showed that year-to-date hiring has slumped to an historical low.
U.S. employers announced 75,891 job cuts in August, a 193 percent increase from July and a 1 percent increase from August 2023, according to the report. August’s total, excluding 2020, marks the highest since 2009.
Announced hiring plans have fallen to the lowest year-to-date total since Challenger, Gray & Christmas began tracking hiring plans in 2005, the report indicated.
“The labor market overall is softening,” Challenger said.
Further, a sharp downward revision of the past year’s job creation numbers by 1.1 million by the BLS sparked debate about the health of the labor market and the broader economy as expectations build for a Fed interest-rate cut.The likelihood of additional rate cuts this year increased following a BLS report showing that unit labor costs grew more slowly than initially estimated in the second quarter, driven by strong worker productivity.
Besides showing that unemployment was either flat or slightly up, the Fed’s Beige Book report also showed that economic activity in roughly three-quarters of the United States was either flat or declining, delivering an additional signal of softness in the economy.
