New data indicates a softening in the U.S. labor market as the number of Americans filing for first-time unemployment benefits saw its largest increase in three months last week. Furthermore, the total number of people continuing to collect jobless relief climbed to its highest level in nearly four years. This persistent weakness suggests the slowdown observed in recent months has extended into August, a trend that could influence the Federal Reserve’s upcoming interest rate decision.
According to the Labor Department, initial claims rose by 11,000 to a seasonally adjusted 235,000 for the week ended August 16. This figure came in higher than economist forecasts and is particularly significant as it aligns with the survey period for the crucial August jobs report. While not indicative of large-scale layoffs, the data points to another month of subdued job growth, with one economist projecting a gain of just 60,000 to 80,000 nonfarm payrolls.
The labor market is currently characterized by low firings but also tepid hiring, a dynamic influenced by economic uncertainties and trade policy. The report also showed that continuing claims, a key proxy for hiring, increased to 1.972 million, the highest level since November 2021. This rise aligns with growing consumer sentiment that jobs are becoming harder to find and could point to the unemployment rate edging higher.
All eyes are now on the Bureau of Labor Statistics’ August payrolls report, due September 5. This release will be scrutinized not only for the headline job growth figure but also for potential revisions to the previous months’ data. The July report featured historically large downward revisions that erased over 250,000 jobs from earlier estimates, an event that led to the firing of the BLS commissioner by President Trump.
