The numbers: The number of people applying for state unemployment benefits jumped in mid-July to the highest level in almost two months, but the increase was concentrated in just a handful of states and probably doesn’t signal any erosion in the U.S. labor market.

Initial jobless claims surged by 51,000 to 419,000 in the seven days ended July 17, the government said Thursday.

The biggest increase took place in Michigan, where autoworkers can be temporarily eligible for benefits when manufacturing plans are briefly shut down each summer to retool for the latest models. Kentucky, another big auto-manufacturing state, also reported an big increase in new claims.

The surge in new claims was well above Wall Street expectations. Economists polled by The Wall Street Journal had forecast 348,000 new jobless claims.

An additional 11,257 applications for benefits were filed through a temporary federal relief program set up during the pandemic, the government said Thursday.

Read: I’ve set pay policies at big companies — here are 3 secrets to getting a raise

The fresh increase in new claims aside, the number of people applying for state or federal benefits has been slouching this year toward pre-pandemic levels. New claims ran in the low 200,000s before the viral outbreak.

Read: Why used-car prices are driving U.S. inflation higher — and why it won’t last

Big picture: The labor market is far from fully healed 16 months after the start of the pandemic. Millions of people who were employed before the viral outbreak remain out of work and many probably won’t return until the fall.

Just over half the U.S. states have cut off extra federal benefits in an effort to prod people to return to the workforce. There’s some evidence the approach has moved the needle, but not enough to alter the bigger picture.

A recent poll by Morning Consult estimates that as many as 1.8 million Americans are staying home because the benefits bring them enough money to get by for now.

As of early July, about 12.57 million people were receiving unemployment compensation. That’s the lowest amount since the month before the pandemic, when fewer than 2 million people were collecting unemployment benefits.

Read: The cost of living posts biggest increase since 2008 as inflation spreads

The government always has difficulty adjusting new claims for seasonal swings in July because of auto-plant shutdowns and the July 4 holiday — a problem compounded by the pandemic.

Note to readers: A government review found the number of distinct individuals collecting benefits has been inflated by fraud and double counting.

Market reaction: The Dow Jones Industrial Average

and S&P 500

were set to open lower in Thursday trades.

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