Payam Javan: The number of Americans filing new applications for unemployment benefits rose to an 11-month high last week, signaling potential softening in the labor market. For the week ending July 27, initial claims increased by 14,000 to a seasonally adjusted 249,000, the highest level since August of the previous year. Economists had forecasted 236,000 claims for the week.

The rise in claims has been partly attributed to seasonal volatility, including temporary shutdowns in motor vehicle plants and disruptions from Hurricane Beryl in Texas. Despite the increase, layoffs remain generally low, with recent government data showing the June layoff rate was the lowest in over two years. The slow labor market is largely due to decreased hiring, influenced by the Federal Reserve’s interest rate hikes in 2022 and 2023.

A separate report from Challenger, Gray & Christmas revealed that planned job cuts by U.S.-based companies dropped 47% to 25,885 in July. Year-to-date job cuts total 460,530, down 4.4% from last year. However, planned hiring remains low, with employers announcing plans to hire 73,596 workers this year, the lowest year-to-date total since 2012.

Federal Reserve Chair Jerome Powell noted that while labor market changes appear consistent with normalization, the Fed is closely monitoring for further signs of more significant shifts. The Fed maintained its benchmark interest rate at 5.25%-5.50% on Wednesday, but hinted at potential rate cuts in September.

The number of people receiving ongoing benefits increased by 33,000 to 1.877 million for the week ending July 20. The upcoming employment report is expected to show a 175,000 increase in nonfarm payrolls for July, with the unemployment rate forecast to remain unchanged at 4.1%.