Initial jobless claims fall more than expected, easing some concerns about the U.S. labor market

Initial claims for unemployment benefits fell more than expected last week, offering some relief to markets that had been worried about further signs of deterioration in the U.S. labor market and the broader economy.

New data from Ministry of Labor The U.S. Labor Department reported that initial jobless claims totaled 233,000 in the week ended Aug. 3, down from 250,000 the previous week and below the 240,000 economists had forecast. In the week ended July 27, jobless claims reached their highest level since August 2023.

Meanwhile, the number of continuing applications for unemployment benefits reached its highest level since November 2021, with 1.875 million applications filed in the week ending July 27, an increase of 6,000 applications from the previous week.

This morning’s report suggests that this could be a further normalization in terms of [labor market] “We are now seeing an improvement in economic conditions, not an indication of outright weakness on the horizon,” Lindsey Pigza, chief economist at Stifel, told Yahoo Finance.

This is the first new report on the state of the labor market since a weak July jobs report sparked recession fears less than a week ago. The report showed the U.S. economy added its second-lowest monthly job gains since 2020 while the unemployment rate rose to 4.3%, its highest level in nearly three years.

Pieza noted that Thursday’s report is likely to offset some of the “increasing concerns” about the labor market seen in recent trading days.

July’s jobs report sent stocks tumbling as investors raced to price in a higher probability that the Federal Reserve would have to cut interest rates more aggressively this year to avoid a recession. But many economists have suggested that more data beyond the July jobs report is needed to determine how quickly the U.S. labor market is slowing.

“We shouldn’t overreact to a single data point,” Brett Ryan, a senior U.S. economist at Deutsche Bank, told Yahoo Finance. “So there’s no doubt that the risks have risen, suggesting that the Fed could start a more aggressive pace of rate cuts, but we’re not there yet.”

Josh Schaffer is a reporter at Yahoo Finance. You can follow him on X @_Joshshafer.

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