The American labor market is sending an unmistakable signal heading into Friday’s July employment report: layoffs are rare, claims are low, and employers are still hiring — even if the pace has cooled from spring. Initial jobless claims ticked up just 1,000 to 199,000 last week, handily beating the 202,000 consensus, while a separate report showed announced layoffs plunged to their lowest level in two years.
It’s a steady-as-she-goes snapshot that gives the Federal Reserve breathing room to stay focused on the inflation fight. With the Middle East conflict now in its sixth month and oil prices swinging on geopolitical headlines, a calm labor market is exactly what policymakers need.
The Numbers
- Initial jobless claims: 199,000 for the week ended August 1, up 1,000 from the prior week’s revised 198,000. Consensus was 202,000. (Source: Department of Labor)
- 4-week moving average: 198,750, down from 203,250 — smoothing out the early-summer spike that briefly sent claims above 225,000 in June. (Source: Department of Labor)
- Continuing claims: 1,801,000 for the week ended July 25, up 24,000 from the prior week. Still well below this year’s averages and consistent with workers finding new jobs quickly. (Source: Department of Labor)
- Federal worker claims: 450 initial claims, up 32 from the prior week — a rounding error against the 199,000 total. (Source: Department of Labor)
Layoffs Plunge to Two-Year Low
The Challenger, Gray & Christmas report painted an even brighter picture. U.S.-based employers announced 33,429 job cuts in July — down 27% from June and the lowest monthly total since July 2024. Compared to July 2025, layoff announcements are down 46%. Year-to-date, planned layoffs are down 41% compared to the same period in 2025. (Source: Challenger, Gray & Christmas via Reuters)
“The pace of layoffs fell dramatically this summer,” said Andy Challenger, chief revenue officer at the outplacement firm. Tech remains the primary sector announcing cuts, with AI reshaping organizations and roles — but the pain isn’t spreading to the broader economy. (Source: Challenger, Gray & Christmas)
On the hiring side, announced hiring plans jumped 47% in July to 16,095 — a four-year high. Companies have announced plans to hire 107,500 workers so far this year, up 25% from the same period in 2025. That said, the increase comes off a very low base, and announced plans don’t always translate to actual hires. (Source: Challenger, Gray & Christmas)
Market Reaction: Dow at Records, Nasdaq Left Behind
The Dow Jones Industrial Average closed at another record high on Wednesday at 54,407, extending its winning streak. S&P 500 futures pointed modestly higher Thursday morning, with the index at 7,736. But the Nasdaq tells a different story — futures slipped 0.6% as AI and tech names continued to sell off on valuation concerns and disappointing earnings from AMD, SanDisk, and Western Digital. (Source: Yahoo Finance, Schwab)
The split-screen is striking: 71% of S&P 500 stocks now trade above their 200-day moving averages, up from 55% in June. The rally is broadening beyond tech — a healthy sign for the durability of the bull market. (Source: Schwab)
The 10-year Treasury yield edged up modestly as markets absorbed the resilient labor data and looked ahead to Friday’s payrolls report. Oil prices eased on reports of progress toward a Strait of Hormuz de-escalation deal between the U.S. and Iran — an outcome that, if realized, would remove one of the biggest tail risks hanging over global markets. (Source: Yahoo Finance, ING)
What to Watch: Friday’s July Jobs Report
Thursday’s data is the appetizer. Friday brings the main course: the July Employment Situation report at 8:30 AM ET. Economists surveyed by Reuters expect nonfarm payrolls to rise by 80,000, a step up from June’s 57,000 gain. The unemployment rate is forecast to hold steady at 4.2%. (Source: Reuters survey)
There’s downside risk: the Conference Board’s consumer confidence survey last week showed the share of consumers viewing jobs as “plentiful” dropped in July to its lowest level since February 2021. And the ISM Services survey on Wednesday showed the employment sub-index contracted — some businesses reported “seeing a small reduction at the moment, some coinciding with AI implementation.” (Source: Reuters, ISM)
Wage growth will be the other number to watch. If average hourly earnings come in hot, it complicates the Fed’s narrative that inflation is on a sustainable path back to 2% — especially with three FOMC members dissenting last week in favor of a rate hike. (Source: Reuters)
Bottom Line
The labor market isn’t cracking. It’s cooling — slowly, and on its own terms. Claims at 199,000 are just 11,000 above the 57-year low hit two weeks ago. Layoffs are at a two-year low. The hiring pipeline, while uneven, is still flowing. For the Federal Reserve, this is the best-case scenario: a labor market strong enough to absorb the oil-price shock from the Iran conflict without forcing policymakers into an uncomfortable choice between jobs and inflation.
Friday’s payrolls number could change the calculus — especially if wage growth surprises to the upside. But for now, the signal from the weekly data is clear: the American worker is still standing, and the factory whistle is still blowing.