Initial filings for unemployment benefits in the United States have reached their highest level since late August 2023, potentially signaling a shift in the otherwise robust labor market. According to the Labor Department's report released on Thursday, jobless claims totaled a seasonally adjusted 231,000 for the week ending on May 4, up 22,000 from the previous period and surpassing the Dow Jones estimate of 214,000. This marks the highest claims number since Aug. 26, 2023.
The increase in claims follows a series of mostly strong hiring reports, although April's hiring figures were lighter than expected. Additionally, job openings have been on the decline, suggesting that the labor market may slow down throughout the year. Continuing claims, which run a week behind, also increased to 1.78 million, up 17,000 from the previous week. The four-week moving average of claims, which helps smooth out weekly volatility, rose to 215,000, an increase of 4,750 from the previous week.
Christopher Rupkey, chief economist at FWDBONDS, expressed concern over the latest jobless claims data, stating, "Weekly jobless claims are one of the timeliest indicators of when the economy is starting to undergo serious deterioration, and the magnitude of new layoffs this week looks worrisome. One week does not a trend make, but we can no longer be sure that calm seas lie ahead for the US economy if today's weekly jobless claims are any indication."
Despite the jump in jobless claims, the labor market has remained relatively strong, with the unemployment rate holding below 4% since February 2022. In April, nonfarm payrolls increased by 175,000, the smallest gain since October 2023 but still indicative of a tight labor market. However, the rise in claims has raised concerns about the potential for a softening labor market in the coming months.
Robert Frick, corporate economist at Navy Federal Credit Union, commented on the unexpected increase in claims, saying, "A low number of claims had become almost monotonous, and while this surprising spike could well be a blip, we should expect more volatility and a trend toward higher claims as the labor market normalizes."
Federal Reserve officials are closely monitoring the jobs numbers as they continue their efforts to bring inflation back to the 2% target. In their recent meeting, policymakers noted that "job gains have remained strong," although these remarks were made before the release of the April employment report. Markets are currently expecting the central bank to begin lowering interest rates in September.
Excluding seasonal adjustments, claims totaled 209,324, up 10.4% from the previous week. New York alone saw an increase of more than 10,000, accounting for more than half of the total rise. This surge in claims from a single state has raised questions about the underlying factors contributing to the increase.
While the recent jump in jobless claims is not yet cause for alarm, it does indicate a potential shift in the labor market's resilience. Companies across various sectors, particularly in technology and media, have been announcing more job cuts recently. Google parent company Alphabet, Apple, eBay, Peloton, Stellantis, Nike, and Tesla have all recently announced layoffs.
As of the week ending April 27, 1.79 million Americans were collecting jobless benefits, an increase of 17,000 from the previous week. This uptick in the number of individuals receiving unemployment benefits further highlights the potential for a softening labor market in the coming months.
