US Weekly Jobless Claims Drop More Than Expected to 233,000

The number of Americans filing new claims for unemployment benefits fell more than expected in the week ending June 20, dropping to 233,000 on a seasonally adjusted basis from a revised 242,000 the prior week. Economists polled by Reuters had forecast 240,000. The decline snapped a two-week stretch of rising claims that had raised concern about a softening labor market.

Continuing claims, which track people still receiving benefits after an initial week of aid, edged lower to 1.83 million from 1.84 million. The four-week moving average of initial claims, a less volatile measure, fell to 236,250 from 238,000. That average has stayed below 240,000 for most of the year, a level economists associate with a healthy jobs market. Readings above 250,000 would signal a more pronounced slowdown.

The data arrives as the Federal Reserve holds interest rates at their highest level in more than two decades. Policymakers have said they need clearer evidence that inflation is sustainably returning to the 2% target before cutting rates. A tight labor market gives the Fed room to keep rates elevated. Cracks have emerged in other parts of the economy. Manufacturing activity has contracted for seven straight months. Consumer spending growth has slowed.

Treasury yields edged lower after the release. The two-year note fell 2 basis points to 4.72%. The dollar slipped against a basket of major currencies. S&P 500 futures (SPY) held modest gains. Traders said the data does not change the market's rate-cut expectations. Futures pricing still implied a 65% chance of a cut by September, according to CME FedWatch.

State-level data showed the largest declines in California and Texas, with New York also posting a notable drop. Together, the three states accounted for roughly half the national decline. No state reported an outsized increase tied to a specific industry or mass layoff event. The broad-based improvement suggests the labor market is stable across sectors.

Initial claims have averaged about 230,000 over the past year, a level that is low by historical standards. Before the pandemic, claims typically ran between 200,000 and 250,000 during periods of economic expansion. The labor market has remained a pillar of the economy even as other sectors slow.

The next major labor-market data point comes July 5, when the Bureau of Labor Statistics releases the June employment report. Economists expect nonfarm payrolls to have risen by 190,000. That would be down from May's 272,000 gain. The pace still points to moderate hiring. The Fed's next policy meeting is July 30-31. The June employment report is due July 5.