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Weekly US jobless claims rise to 260,000 ahead of non-farm payrolls report

Weekly US jobless claims rise to 260,000 ahead of non-farm payrolls report
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Last week, initial claims for unemployment insurance totaled 260,000, which was close to the highest level since November amid changes in the US labor market.

The total for the week ended July 30 was in line with Dow Jones estimates but gained 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 by $5.3 billion to $79.6 billion in June, slightly below estimates of $80 billion.

The number of jobless claims comes a day after the Bureau of Labor Statistics released the expected nonfarm payrolls report for July. This is expected to show the US economy adding 258,000 positions in the month, compared to the June estimate of 372,000 and the lowest total since December 2020.

A for-hire sign is posted in the window of a Chipotle restaurant in New York, April 29, 2022.

Shannon Stapleton | Reuters

“The labor market remains healthy as the summer quarter progresses, but the increase in initial claims since the beginning of April is a cool breeze in this summer’s hot labor market,” said Stuart Hoffman, chief economic adviser at PNC Financial Services.

Federal Reserve officials are watching the job market closely for clues about the economy, which is showing the highest level of inflation in more than 40 years.

Jobless claims were at their lowest level since the late 1960s, but began to rise in June as inflationary pressures mounted and companies began to cut back on hiring. Even with strong hiring in 2021 and the first half of 2022, the overall employment rate is 755,000 lower than in February 2020, the last month the Covid pandemic hit.

The four-week moving average of jobless claims, which strips out weekly volatility, reflects changes in the labor market. The number rose 6,000 from the previous week to 254,750, up sharply from 170,500 on April 2 and the highest level of the year.

Pending claims, a week behind the headline number, rose 48,000 from the previous week and 83,000 from early July to 1.42 million.

The trade deficit is at a record high

On the trade side, the low deficit reflects a return to a more normal environment after the US traded with its global trading partners at 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 $37 billion. Imports of cars, parts and engines decreased by $2.7 billion, while capital goods increased by nearly $1 billion.

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

The Federal Reserve has implemented four rate hikes this year, totaling 2.25 percentage points, in an effort to curb some of the demand during the pandemic. Fresh inflation figures will be released next week after June’s consumer price index showed a 12-month increase of 9.1%.

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