US Jobless Claims Rise; Regional Manufacturing Weakens, Inflation Pressures Build

Labor Market Softens as Jobless Claims Beat Forecasts

Initial US unemployment claims rose to 235,000 in the week ending August 16, exceeding the Bloomberg consensus estimate of 225,000. It marks the highest weekly reading since June and continues a trend of gradually increasing claims. Continuing claims also advanced to 1.97 million, their highest level since November 2021, slightly above expectations of 1.96 million.

These figures underscore a cooling labor market, with more workers relying on ongoing jobless benefits. While not yet signaling broad deterioration, the rise in both initial and continuing claims may influence sentiment around labor demand resilience, especially ahead of upcoming Federal Reserve meetings.

Manufacturing Outlook Dips as Orders Turn Negative

The August Manufacturing Business Outlook Survey revealed weaker activity across several key indicators. The general activity index dropped sharply from 15.9 to -0.3, and new orders slipped into negative territory at -1.9 — their first sub-zero reading since April. Shipments also fell to 4.5, and the employment index dropped to 5.9, though it still indicated net hiring.

While the average workweek improved slightly, the weakening in orders suggests softer demand across the manufacturing sector. Importantly, 74% of surveyed firms reported no employment change, while only 16% saw an increase. These stagnant conditions may weigh on regional output expectations and could constrain broader industrial performance in Q3.

Price Pressures Mount; Firms Eye Competitor Price Hikes

Price pressures remain elevated. The prices paid index jumped 8 points to 66.8 — the highest since May 2022 — while prices received rose to 36.1. Firms also lifted their 12-month forward price expectations to 4.1%, up from 3.8% in May, suggesting pricing power remains strong despite economic headwinds.

Over half the surveyed firms anticipate rising industry costs within the next six months, with 71.4% expecting competitors to raise prices — and a median expectation that price changes will materialize within three months. While compensation growth expectations eased to 3.5% from 4.0%, higher input and output price expectations may keep inflation indicators elevated in the near term.

Market Forecast: Bearish Near-Term Outlook on Slowing Labor and Manufacturing Signals

The combination of weakening labor market indicators, declining manufacturing orders, and persistent price pressures paints a cautionary picture. While future expectations in the survey remained positive, current conditions are deteriorating. The near-term outlook for US equities and industrials is bearish, particularly if softening demand collides with sticky inflation, complicating the Federal Reserve’s path on rates. Traders should monitor upcoming employment data and inflation prints closely for confirmation.