Economic Report: Jobless claims in U.S. drop to four-week low of 239,000

Unemployment claims typically rise when the economy weakens and a recession approaches. They climbed in the past two months to the highest level in almost two years, but are still quite low historically.

Key details: New jobless claims declined in 35 of the 53 states and territories that report these figures to the federal government. Most of the states that have posted big increases lately such as Texas and California saw large drops.

The number of people collecting unemployment benefits in the U.S., meanwhile, fell by 19,000 to 1.74 million and touched the lowest level since February. These so-called continuing claims had hit a one-and-a-half-year high of 1.83 million in April.

Big picture: The recent rise in jobless claims was viewed by some economists as a sign the demand for labor was waning as higher interest rates boxed in the U.S. economy.

The weekly report has been less reliable lately, however, due to widespread fraud, not to mention lingering effects from the pandemic. It may take a stream of weaker readings to determine if the uptrend is truly real.

Some economists also speculate the recent rise in claims stems from unemployed workers running out of severance benefits after being laid off early in the year. They may be filing now because they haven’t found a new job yet.

Whatever the case, the current level of claims is suggests the labor market and U.S. economy are still going strong.

Looking ahead: “Even with the increase this year initial claims remain quite low on an historical basis,” not senior economist advisor Stuart Hoffman of PNC Financial Services. “And it is not yet clear if the increase in claims in 2023 is simply the result of a bit more slack in the labor market, or if it is a harbinger of bigger layoffs and an impending recession.”

Market reaction: The Dow Jones Industrial Average
DJIA,
+0.50%
and S&P 500
SPX,
+0.20%
were set to open higher in Thursday trades.