The number of Americans filing for jobless benefits jumped to the highest level in 10 months last week, a sign that the labor market is likely cooling under the weight of high interest rates.
Unemployment benefit applications for the week ending June 8 rose by 13,000 to 242,000, up from 229,000 the week before, the Labor Department reported Thursday. That's significantly more than the 225,000 new claims analysts were expecting and the most since August of 2023.
The four-week average of claims, which softens some of the week-to-week volatility, rose to 227,000. That's an increase of 4,750 from the previous week and the highest since September, but still less than the average one year ago.
Weekly unemployment claims are seen as a stand-in for the number of U.S. layoffs in a given week and a sign of where the job market is headed. They have remained at historically low levels since millions of jobs vanished when the COVID-19 pandemic hit the U.S. in the spring of 2020.
“While layoffs remain low, an increase in claims may indicate that those losing their jobs are filing for benefits because they are finding it more difficult to get new jobs,” said Nancy Vanden Houten, lead U.S. economist of Oxford Economics. “That would be consistent with a slower pace of hiring and fewer workers leaving their jobs.”
Though this week’s number seems relatively high, it’s still within a range that reflects a healthy labor market. However, sustained layoffs at this level could have some influence on Federal Reserve officials, who keep close watch on the labor market when considering interest rate decisions.
The Federal Reserve raised its benchmark borrowing rate 11 times beginning in March of 2022 in an attempt to extinguish the four-decade high inflation that took hold after the economy rebounded from the COVID-19 recession of 2020. The Fed’s intention was to cool off a red-hot labor market and slow wage growth, which can fuel inflation.
Many economists had expected the rapid rate hikes would trigger a recession, but that’s been avoided so far thanks to strong consumer demand and sturdier-than-expected labor market.
Though a report Wednesday showed that consumer inflation cooled a bit last month, the Federal Reserve later that day left its benchmark lending rate at a 23-year high. Fed Chair Jerome Powell said officials at the U.S. central bank need more evidence that price increase are on the way toward their 2% target.
America’s employers added a strong 272,000 jobs in May, accelerating from April and a sign that companies are still confident enough in the economy to keep hiring despite persistently high interest rates.
But last week’s report from the government included some signs of a potential slowdown. The unemployment rate edged up for a second straight month, to a still-low 4%, from 3.9%, ending a 27-month streak of unemployment below 4%. That streak had matched the longest such run since the late 1960s.
The government also recently reported that job openings fell to 8.1 million in April, the fewest vacancies since 2021.
Though layoffs remain relatively low, some high-profile companies have been announcing more job cuts recently, mostly across technology and media. Google parent company Alphabet, Apple and eBay have all recently announced layoffs.
Outside of tech and media, Walmart, Peloton, Stellantis, Nike and Tesla have recently announced job cuts.
In total, 1.82 million were collecting jobless benefits during the week that ended June 1, an increase of 30,000 and the most since early this year.
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