The impact of Hurricane Beryl in Texas faded faster than expected in U.S. initial jobless claims data, helping push new claims to a four-week low of 233,000 for the week ending Aug. 3, according to Labor Department data released Thursday.
The drop in new claims was much-needed good news, as the market’s initial reaction to the data was very positive. After Monday’s stock market meltdown sent investors scrambling for any signs of a potential economic downturn, even the smallest sign of economic weakness might have spooked the market.
However, we don’t think we are out of the woods yet. With another hurricane hitting Florida this week, new claim data will likely spike in the coming weeks, extending the volatile streak of jobless claims that resembles claim numbers from the same time last year.
The fact that the claim data—especially continuing claims—has remained on an uptrend implies a gradual slowdown of the labor market. Continuing claims inched up to 1.875 million for the week ending July 27, from 1.869 million earlier.
While jobless claims will continue to be a key metric in the coming months for the market to assess the strength of the economy, the weekly data is inherently noisy. Thus, it is important to not overreact to a few weeks of data. We continue to focus on the claim data using the 13-week moving average for any key signals. It won’t be until late September, in our opinion, that we get a real sense of what direction the claim data is pointing.
