The number of Americans filing for unemployment benefits last week rose to the highest level in eight months, the latest sign that the historically tight labor market is starting to cool.
Figures released Thursday by the Labor Department show that applications for the week ended July 16 rose to 251,000 from the 240,000 recorded a week earlier. It marked the highest level for jobless claims since mid-November.
Continuing claims, or the number of Americans who are consecutively receiving unemployment aid, rose slightly to 1.384 for the week ended July 9, up by 51,000 from the previous week's revised level. One year ago, nearly 12.5 million Americans were receiving unemployment benefits.
"The labor market is softening but the change is so far gradual," said Bill Adams, chief economist for the Texas-based Comerica Bank. "The U.S. economy is cooling but is probably not in recession in July."
The report comes amid growing fears that the U.S. economy is on the cusp of a recession as a result of the Federal Reserve's war on inflation. The central bank is raising interest rates at the fastest pace in decades as it races to cool consumer prices, which surged 9.1% in June – the fastest year-over-year increase since 1981.
Policymakers are expected to approve another mega-sized, 75-basis point rate hike when they meet next week.
For months, the labor market has been one of the few bright spots in the economy. The Labor Department reported two weeks ago that employers added a robust 372,000 jobs in June and that the unemployment rate remained at 3.6% – near a historic low – for the fourth consecutive month.
But there are signs that the labor market is starting to weaken, with a plethora of companies, including Alphabet's Google, Apple, Meta and Microsoft, announcing hiring freezes or layoffs in recent weeks.
"With jobless claims on an upward trend over the last month, some may question if the labor market will start to factor in more to the Fed’s plan as it works aggressively to tame inflation," said Mike Loewengart, managing director of investment strategy at E*Trade. "The market has been rallying in July so don’t be surprised to see it take a breather as it prepares for what is seeming to be another three-quarter hike."