The number of Americans filing new claims for unemployment benefits unexpectedly rose last week, but that likely does not suggest a material shift in labour market conditions, with another month of strong job growth expected in July.
Initial claims for state unemployment benefits increased 51,000 to a seasonally adjusted 419,000 for the week ended July 17, the Labor Department said today.
Economists polled by Reuters had forecast 350,000 applications for the latest week.
The rise in claims likely reflects difficulties smoothing the data for seasonal fluctuations following the upheaval from the Covid-19 pandemic.
In normal years, layoffs are usually expected to decline in the second half of July. Before the pandemic, summer factory closures were the norm in early July, especially in the car industry.
Claims have declined from a record 6.149 million in early April 2020, but they remain above the 200,000-250,000 range that is seen as consistent with healthy labour market conditions.
Though the Delta variant of the coronavirus is driving a surge in infections mostly among unvaccinated Americans, economists do not expect large-scale business shutdowns.
But the latest wave of infections stil poses a risk to the economy, which experienced a sharp two-month recession in 2020 due to the pandemic.
The National Bureau of Economic Research's business cycle dating committee declared on Monday that the recession, which started in February 2020, ended in April 2020.
Last week's claims data covered the period during which the government surveyed business establishments for the non-farm payrolls component of July's employment report.
The economy created 850,000 jobs in June after adding 583,000 in May. Employment is 6.8 million jobs below its peak in February 2020.
Data next week on the number of people continuing to receive benefits after an initial week of aid will offer more clues on how hiring fared in July.
Claims data have been muddied by the federal government's expansion of benefits to people who do not qualify for the regular state programmes. People have to apply for state programmes to determine eligibility for federal benefits.
The so-called continuing claims, which are reported with a one-week lag, have been falling since late June.
At least 20 states led by Republican governors have pulled out of federal government-funded unemployment programmes, including a $300 weekly payment, which businesses claimed were encouraging unemployed Americans to stay at home.
There were a record 9.2 million job openings at the end of May. About 9.5 million people are officially unemployed.
Evidence is mixed on whether the early termination of federal benefits, which started on 12 June and will run up to 31 July, is encouraging job searches. The expanded benefits will lapse on September 6 for the rest of the country.
Continuing claims have decreased in some states that have terminated federal benefits as well as in those that remain on the programmes. They have also risen in some states that have prematurely ended expanded benefits.