US jobless claims hold near 199,000 as layoffs stay historically low

US initial jobless claims edged up 1,000 to 199,000 in the week ended Aug. 1, staying below the 200,000 mark and beating the 204,000 consensus, as a cooling labor market shows employers reluctant to shed workers.

The Labor Department's report Thursday showed the four-week moving average fell 4,500 to 198,750, while continuing claims rose 24,000 to 1.801 million in the week ended July 25, with the insured unemployment rate steady at 1.2 percent.

The figures reinforce a "low-hire, low-fire" labor market. June payrolls added just 57,000 jobs, less than half the prior month's total, while the unemployment rate fell to 4.2 percent from 4.3 percent — a decline driven mostly by workers leaving the labor force rather than new hiring. ADP employment and the ISM Services Employment Index have pointed to softer hiring momentum in recent weeks.

The report lands a day before the July nonfarm payrolls release, the week's most consequential data point. With the Fed's preferred inflation gauge, PCE, at 3.7 percent for June and the central bank holding rates, CME FedWatch data shows most traders expect a hike at the Sept. 16 FOMC meeting.

Weekly claims have stabilized in a range mostly between 200,000 and 250,000 since the economy emerged from the pandemic recession. Hiring began slowing about two years ago and tapered further in 2025 on tariffs, the federal workforce purge and the lingering effects of high interest rates. Companies including Verizon, UPS, Amazon, Disney, Starbucks, Walmart and Microsoft have trimmed headcount recently.

The steady claims data has kept bond markets anchored even as equities price continued corporate profit growth. Mortgage rates, which track yields on mortgage-backed securities, inched lower this week, with the average 30-year fixed rate at 6.71 percent, down 0.02 percent from a day earlier. Bond traders have kept yields correlated with oil prices, which have spiked on the conflict in Iran; a prolonged closure of the Strait of Hormuz could choke off about 20 percent of the world's oil supply.

What the data means for the Fed

The contained claims figures give the Federal Reserve room to keep policy restrictive while inflation runs above target. New Fed Chair Kevin Warsh reaffirmed the 2 percent annual target on July 29, when the FOMC left rates unchanged. A prolonged conflict in Iran could fuel inflation further, and a hike at the Sept. 16 meeting would raise borrowing costs for businesses and make them less likely to hire.

The last time claims held this low for a sustained stretch was in the tight labor market of 2023, when the unemployment rate sat near 3.5 percent and employers added an average of more than 200,000 jobs a month. Today's picture is different: hiring has cooled to a crawl while layoffs remain contained, a combination that keeps the labor market resilient but no longer a source of upward wage pressure.

If Friday's payrolls report shows another month of tepid gains, the case for a September hike strengthens. If hiring surprises to the upside, the Fed may hold longer, betting that a still-tight labor market can absorb higher rates without cracking.

This article is for informational purposes only and does not constitute investment advice.