Weekly Jobless Claims Rise To 2024 High: Is The Number Signal Or Noise Ahead Of Friday's Jobs Report?

Weekly jobless claims rose in the week ending July 27 to a 2024 high. Is this a signal for the state of the labor market or simply noise?

The Data: The U.S. Department of Labor released its weekly jobless claims report on Thursday, returning numbers worse than expected.

The figure for seasonally-adjusted initial claims was 249,000, an increase of 14,000 from the previous week’s unrevised level of 235,000. Experts expected this week’s number to clock in at 236,000.

This is the highest reading since August 2023 and a sharp increase from the 2024 low of 189,000 in January.

Economist Reactions: The initial jobless claims report precipitated mixed reactions from experts. University of Pennsylvania Wharton Professor Mohamed A. El-Erian quickly turned his sights to Friday’s jobs report.

“The upside beat in US weekly jobless claims — up 14,000 to 249,000 — heightens interest in tomorrow’s more comprehensive monthly jobs report,” El-Erian posted on X. “This comes at a time when there is growing awareness of the labor market’s crucial role in America’s continued economic exceptionalism.”

Parker Ross, Global Chief Economist at Arch Capital Group, expressed concern at the jobless claim uptrend but noted other confounding factors affecting the data.

“There are several confounding factors that prevent a clear read from this data in recent weeks, including the timing of the Independence Day holiday, Hurricane Beryl, auto retooling in Michigan, and the new Minnesota law that allows hourly workers to claim UI benefits during the summer,” Ross said.

Liz Young Thomas, Head of Investment Strategy at SoFi, reacted similarly.

“This seems worrying from a bird’s eye view, but there could be some residual seasonality skewing things–unadjusted claims are only marginally higher than last year or 2017-19 levels.”

Why it Matters: The Bureau of Labor Statistics will release its closely followed jobs report on Friday.

Unemployment was 4.1% in June, up from 3.6% a year prior. If unemployment rises to 4.2%, it will trigger the recessionary Sahm rule indicator.

An especially poor jobs report could induce the Federal Reserve to cut rates by 50 basis points instead of the expected 25. The odds of two September rate cuts jumped to 17.5% on Thurday morning per CME FedWatch.

The S&P 500 and Nasdaq Indexes hovered around even at the time of writing. This perhaps indicates a teetering between euphoria at the prospect of multiple rate cuts and concern over the labor market. The iShares 20+ Year Treasury Bond ETF TLT was up 1.27%.

Also Read:

• US Private Employment Rises By 122,000 In July, Misses Estimates: ‘If Inflation Goes Back Up, It Won’t Be Because Of Labor’

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