U.S. initial jobless claims rise modestly, may move higher in weeks ahead

Initial jobless claims in the U.S. rise modestly in the last week of June. In the week ended 1 July, initial jobless claims increased by 4k to 248k, slightly higher than the consensus expectations of 243k. However, the four-week moving average in initial claims remained stable at 243k. Continuing claims for the week ended 24 June also rose modestly by 11k to 1956k, while the four-week average rose by 7k to 1938k. The insured jobless rate remained stable at 1.4 percent. The claims data overall continue to be in line with low rates of job separation in the labor market.

The 4 July week starts with the annual summer shutdown in the auto sector as automakers conduct maintenance, manage new product lines, and adjust inventory levels. Initial claims data in the weeks ahead will show their decisions of the timing and length of the shutdown process which might be longer than normal, showed reports.

In previous years, as recession turned to recovery and demand for autos rose, several automakers chose to let go of the annual shutdown period to keep production in line with demand. As the recovery has progressed and pent-up demand for autos has likely been filled, the high levels of existing inventories and weakening demand are expected to result in some automakers to shut down for longer than the normal one to two weeks.

If so, seasonal adjustment factors might not totally capture this shift in behaviour, and initial claims data might move higher in the weeks ahead, said Barclays in a research report.

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