Jobless Claims Climb as Manufacturing Hiring Stalls

Unemployment claims rose last week while hiring activity in the U.S. manufacturing sector slowed to a standstill last month, signaling potential strain in the labor market.
Initial claims, which are a high-frequency data-point tracking the health of the labor market, tend to be viewed by analysts as a proxy for unemployment, which has been drifting higher in recent months as the economy has cooled.
Continuing jobless claims, which reflect the number of Americans continuing to collect unemployment benefits after filing an initial claim, also rose by 4,000 for the week, to 1.863 million, according to the Labor Department data. This is the highest level since Nov. 27, 2021, with an increase in continuing claims suggesting growing difficulty finding a job after losing one.
Markets have been increasingly on edge as the labor market has shown more signs of strain amid the current high interest rate environment.
In a bid to cool soaring inflation, the Fed brought rates up quickly to their current range of 5.25 to 5.5 percent, with higher borrowing costs dampening economic activity. Investors now overwhelmingly expect a 25 basis-point cut at the central bank’s next policy meeting, on Sept. 18.
“Growth has become increasingly dependent on the service sector as manufacturing, which often leads the economic cycle, has fallen into decline,” Chris Williamson, chief business economist at S&P Global, said in a statement, in which he said that the so-called soft landing scenario, in which inflation falls but the economy doesn’t tip into a recession, “looks less convincing.”
“The manufacturing sector’s forward-looking orders-to-inventory ratio has fallen to one of the lowest levels since the global financial crisis,” he added.
Wall Street was mostly flat in early morning trading following the release of the jobless claims numbers and the manufacturing data.
Recent months have, on occasion, seen markets react to weak economic data by rallying as the bad numbers bolster the case for a Fed rate cut, with cheaper money tending to buoy stocks.