US Unemployment Claims Drop, Easing Recession Fears

The number of American unemployment claims fell significantly, calming concerns about the labor market. With a decrease of 17,000 to 233,000 claims last week, it marked the largest drop in almost a year. The labor market remains relatively strong despite temporary disruptions from motor vehicle plant shutdowns and Hurricane Beryl.

The number of Americans filing new applications for unemployment benefits fell more than expected last week, easing fears that the labor market was unraveling. Initial claims for state unemployment benefits dropped by 17,000 to a seasonally adjusted 233,000 for the week ended Aug. 3, according to the Labor Department. This marks the largest decrease in about 11 months.

This decline followed a surprise sharp increase in jobless claims the previous week, likely influenced by temporary motor vehicle plant shutdowns and Hurricane Beryl. The prior week's claims were slightly revised up to 250,000 from the initial 249,000. Following this news, U.S. stocks gained, while benchmark Treasury yields rose above 4% and the U.S. dollar strengthened.

"The talk of an imminent recession seems wide of the mark," stated Marc Chandler, chief market strategist at Bannockburn Global Forex. Investors adjusted their expectations for future Federal Reserve interest rate cuts. Claims have been on an upward trend since June, partly due to plant shutdowns and hurricane disruptions. However, layoffs remain generally low, and the labor force has maintained a steady growth rate comparable to pre-pandemic levels.

(With inputs from agencies.)