Rise in US Jobless Claims Adds to Signs of Labor Market Softness

Data May Also Boost the Argument for Fed to Lower Interest Rates at Its Next Meeting

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The number of Americans filing new applications for jobless benefits rose by the most in about three months last week, and the number of people collecting unemployment relief in the prior week climbed to the highest level in nearly four years, signaling that recent labor market softness continued into August.

The data may also add to the argument for the US Federal Reserve to lower interest rates at its next meeting in about four weeks.

Initial claims for state unemployment benefits rose by 11,000—the largest increase since late May—to a seasonally adjusted 235,000 for the week ended Aug. 16, the Labor Department said on Aug. 21.

Economists polled by Reuters had forecast 225,000 claims for the latest week.

The data covered the survey week for the August non-farm payrolls report from the Bureau of Labor Statistics (BLS), and while it does not yet suggest large-scale layoffs are afoot, it nonetheless points to another month of sub-par jobs growth.

"Directionally, the data shows some deterioration in labor market conditions since last month, but the magnitude is limited," said Jefferies chief US economist Thomas Simons.

"Based on this report alone, we expect (August) NFP (non-farm payrolls) will print in the 60,000 to 80,000 range."

The labor market has split into low firings and tepid hiring as businesses navigate US President Donald Trump's protectionist trade policy, which has raised the nation's average import duty to its highest level in a century.

Jobs growth has averaged 35,000 jobs a month over the last three months, the government reported in early August.

Domestic demand grew in the second quarter at its slowest pace since the fourth quarter of 2022.