Unemployment claims are rising again in another sign that the labor market is cooling

A woman walks outside a store in New York City on February 22, 2021.

John Smith | Corbis News | Getty Images

Initial unemployment claims hit their highest levels since mid-November last week, the latest sign that a historically tight labor market is beginning to slow, according to Labor Department data released Thursday.

In the week ending July 16, 251,000 claims were up, up 7,000 from the week before and above the 240,000 Dow Jones estimate.

The gains brought unemployment insurance claims to their highest weekly level since Nov. 13, 2021 and provided another indicator that a job market on fire in 2021 is beginning to cool this year.

Sustained claims, one week behind the leading number, rose to 1.384 million, the highest total since April 23.

A separate release Thursday also showed some weakness in the jobs picture.

The Philadelphia Fed manufacturing index fell to -12.3, down 9 points from a week ago and significantly worse than the Dow Jones estimate of 1.6. The number represents the percentage difference between companies that report an increase in activity and companies that see a contraction.

The employment index in particular was 19.4, also down 9 points. While that points to continued recruitment growth, it is the lowest level since May 2021 and also indicates that hiring is slowing down. The average workweek value was 6.4, a decline for the fourth consecutive month and an indication that productivity could decline.

Companies in the survey reported higher costs for salaries, with 78.6% saying they’ve increased wages and benefits over the past three months, without respondents saying they’ve cut them.

The survey also showed that inflationary pressures are still high, but cooling. The indices for prices paid and prices received both fell from a month ago but remained high at 52.2 and 30.3 respectively.

The data is accompanied by significant uncertainty about the direction of the economy.

Employment was the main bright spot, with the nonfarm payroll rising averaging 457,000 per month during the first half of the year. However, those increases have been slowing lately, averaging 375,000 in the last three months.

Most other data indicates that the US could be in the midst of meeting the rule of thumb for a recession, with two consecutive quarters of negative growth. Gross domestic product fell 1.6% in the first quarter and is on track to fall another 1.6% in the second quarter, according to the Atlanta Federal Reserve.

Fed officials are expected to hike rates by another 0.75 percentage point next week, pushing the benchmark overnight interest rate to a range of 2.25%-2.5%. The Fed is trying to slow down an economy that has caused the highest inflation rate since 1981.

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