U.S. Jobless Claims Show Modest Drop, but Hiring Remains Tepid

Last week, initial applications for U.S. state unemployment benefits fell slightly, reflecting low layoffs, but hiring remains cautious amid slowing domestic demand.

Key Data:

• Initial claims: 224,000 (down 3,000 from previous week)
• Forecast: 228,000 claims
• Continuing claims: 1.953 million (down 15,000), reflecting people remaining on benefits after their first week of aid

Labor Market Context:

• Employment gains averaged 35,000 jobs per month over the last three months, showing tepid hiring
• Domestic demand grew at its slowest pace since Q4 2022, contributing to cautious employer hiring
• Protectionist trade policies, including the highest average U.S. import duty in a century, are adding uncertainty for businesses

Implications:

• Low layoffs keep claims modest, but hiring softness may push the unemployment rate up to 4.3% in August (from 4.2% in July)
• Consumers perceive jobs as harder to find, consistent with elevated continuing claims
• Economists caution that headline claims alone mask the slower underlying trend in employment growth

Summary
While job losses remain limited, weak hiring and slowing domestic demand suggest the U.S. labor market is losing momentum, hinting at a possible gradual rise in unemployment in the near term.