Initial claims for state unemployment benefits increased 6,000 to a seasonally adjusted 227,000 for the week ended July 29, the Labor Department said on Thursday. Economists polled by Reuters had forecast 227,000 claims for the latest week.

The labor market has largely weathered 525 basis points in interest rate hikes from the Federal Reserve since March 2022. Claims are in the lower end of their 194,000-265,000 range for this year, in part benefiting from difficulties adjusting the data for seasonal patterns.

Automakers typically idle plants in July to retool for new models. But these temporary closures do not always happen around the same time, which could throw off the model the government uses to strip out seasonal fluctuations from the data.

Nevertheless, the overall labor market remains solid as employers hoard workers after struggling to find labor during the COVID-19 pandemic. While there have been high-profile layoffs in the technology and finance sectors, small businesses are still boosting headcount after being squeezed out by large enterprises snapping up workers.

Labor market strength and receding inflation are fanning optimism that the economy could avoid a recession.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 21,000 to 1.700 million during the week ending July 22, the claims report showed. These so-called continuing claims remain low by historical standards, indicating that some laid-off workers are experiencing short spells of unemployment.

The Labor Department reported on Tuesday that there were 1.6 job openings for every unemployed person in June, little changed from May. The claims data have no bearing on July's employment report, which is scheduled to be released on Friday.

Nonfarm payrolls likely increased by 200,000 jobs in July after rising by 209,000 in June, according to a Reuters poll of economists. The unemployment rate is forecast to be unchanged at 3.6% in July.

Though a survey from the Institute for Supply Management this week showed a measure of manufacturing employment plummeted to a three-year low in July, other data support another month of solid payrolls gains. The ADP's national employment report on Wednesday pointed to strong private hiring last month and the Conference Board's consumer confidence survey showed households bullish on the labor market.

That was reinforced by a separate report on Thursday from global outplacement firm Challenger, Gray & Christmas that showed U.S.-based employers announced 23,697 cuts in July, the lowest number since August 2022. Layoffs were down 42% from June.

"Companies, weary of letting go of needed workers, are finding other ways to cut costs," said Andy Challenger, senior vice president at Challenger, Gray & Christmas. "Many have slowed hiring."