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Applications for US unemployment benefits jumped last week to the highest level since October 2021, suggesting mounting layoff announcements may be starting to translate into job cuts.
Initial jobless claims rose by 28,000 to 261,000 in the week ended June 3, which included the Memorial Day holiday, a Labor Department report showed Thursday. The increase was the biggest since July 2021 and exceeded all forecasts in a Bloomberg survey of economists.
Continuing claims, which include people who have received unemployment benefits for a week or more and are a good indicator of how hard it is for people to find work after losing their jobs, fell to 1.76 million in the week ended May 27, the lowest level since mid-February.
The data can be choppy from week to week, especially around major holidays. The four-week moving average of initial claims, which smooths out some of the volatility, rose to 237,250.
“The latest reading reflects a holiday-shortened week (Memorial Day), which ought to raise suspicions that the big move was more noise than signal,” Stephen Stanley, chief US economist at Santander US Capital Markets, said in a note to clients following the release. “I am eager to see next week’s reading before I draw any conclusions.”
The report highlights a labor market that, while largely resilient, may be starting to show signs of cooling. US companies announced more layoffs in the first five months of 2023 than in all of last year. While job cuts have mostly been contained to white-collar sectors including technology and banking, economists expect those plans to soon materialize into more dismissals.
What Bloomberg Economics Says…
“The surge in jobless claims — to the highest level since October 2021 — is in line with our analysis of WARN notices, which suggested layoffs were set to spike. It’s increasingly feasible for the unemployment rate to reach the median FOMC participant’s 4.5% projection by year-end.”
— Eliza Winger, economist
To read the full note, click here
The data follow the government’s monthly jobs report, which last week painted a mixed picture regarding the direction the labor market is headed. While the US added the most payrolls in May since the start of the year, the unemployment rate ticked up and wage growth slowed. That happened in part because the report is made up of two surveys — one of businesses and one of households — which reported different outcomes.
On an unadjusted basis, claims rose to 219,391 in the week ended June 3. The rise in filings was led by applications in Ohio, California and Minnesota.
