Initial filings for unemployment insurance fell more than expected last week, offering some relief to markets worried about further signs of deterioration in the US labor market and the broader economy.

New data from the Department of Labor showed there were 233,000 initial jobless claims filed in the week ending Aug. 3, down from 250,000 the week prior and below the 240,000 economists had expected. In the week ending July 27, jobless claims hit their highest level since August 2023.

Meanwhile, the number of continuing applications for unemployment benefits hit its highest level since November 2021, with 1.875 million claims filed in the week ending July 27, up 6,000 from the week prior.

"This morning's report suggests that that may be more of a normalization in terms of [labor market] conditions, as opposed to an indication of outright weakness lurking around the corner," Stifel's chief economist Lindsey Piegza told Yahoo Finance.

The release is the first fresh reading on the state of the labor market since a weak July jobs report fueled recession fears less than a week ago. That report showed the US economy tallied its second-lowest monthly job additions since 2020 while the unemployment rate rose to 4.3%, its highest level in nearly three years.

Piegza noted that Thursday's report will likely offset some of the "rising concern" about the labor market seen in recent trading days.

July's jobs report sent stocks tumbling as investors quickly scrambled to price in higher odds of the Federal Reserve needing to cut interest rates more aggressively this year to avoid recession. But many economists have pointed out that more data than just the July jobs report will be needed to determine how quickly the US labor market is cooling.

"You don't want to overreact to one data point," Deutsche Bank senior US economist Brett Ryan told Yahoo Finance. "So without question, the risks have risen, leaning toward the Fed starting off with a more aggressive pace of rate cuts, but we're not there yet."

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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