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Initial jobless claims in regular state programs totaled a seasonally adjusted 1.3 million in the week ended July 11, down just 10,000 from the prior week, the Labor Department reported this morning. That’s the smallest drop in the new claims since March and feeds into worries that the recovery in the jobs market is stalling as states pause or reverse re-openings. Economists had expected initial claims for the week to fall to 1.25 million.

17.3 million Americans claimed ongoing unemployment benefits in state programs in the week ended July 4. (The two data series show a lag of a week for continuing claims.) So far, according to Bank of America, 22 states have either reversed or paused reopening.

The slowdown in the jobs market recovery comes as the $600 enhanced weekly unemployment benefit is set to expire on July 31. That will return the average weekly payment to $350.

The latest claims numbers are “disappointing to say the least,” Joel Naroff of Naroff Economics told Bloomberg. “I would not be surprised if these numbers start rising.”

Which could well produce a nasty surprise in the July jobs number due to be reported in early August.

Without the sometimes misleading and always tricky seasonal adjustment, initial claims rose by 108,800 to 1.5 million. That’s the first increase in that data series since early April. This was the 17th straight week to see new claims above 1 million. New claims for unemployment averaged a little more than 210,000 a week before the coronavirus outbreak.
In the week ended July 11, states reported 928,488 initial claims for Pandemic Unemployment Assistance, the federal program that extends unemployment benefits to those not typically eligible like the self-employed. That was down  from 1.05 million the prior week.

The market took its tone from the initial claims report rather than from a report that showed retail sales climbed in June by more than forecast to reach levels seen before the coronavirus pandemic.

As of 3:30 p.m. the Standard & Poor’s stock index was down 0.50%. The Dow Jones Industrial Average slid 0.69%. The NASDAQ Composite was off 0.87% and the Russell 2000 small cap index dropped 1.11%. The iShares MSCI Emerging Markets ETF (EEM) fell by 1.64%.

Shares of “re-opening dependent” companies led the market down today, just as they’d led the rally yesterday. As of 3:30 p.m. American Airlines was off 7.96% and Six Flags (SIX) was lower by 2.81%. Starbucks (SBUX) fell 2.06% and cruise operator Carnival (CCL) was down 8.99%.

The one positive today, to my mind, was that the morning’s lower opening hadn’t, as of 3:30 p.m., produced a cascade of selling. The S&P 500, for example, was down 0.45% as of 1:30 pm and traded lower by 0.34% at the close.