Initial claims for unemployment benefits have reached the highest level since late August 2023, a possible sign that an otherwise robust labor market is changing.
Unemployment claims for the week ended May 4 totaled 231,000 on a seasonally adjusted basis, up 22,000 from the prior period and higher than the Dow Jones estimate of 214,000, the Labor Department reported Thursday. It was the highest number of claims since August 26, 2023.
The increase in claims follows a series of mostly strong hiring reports, although hiring in April was light compared to expectations. Vacancies have also decreased, while the labor market is expected to slow down this year.
The report also showed that continuing claims, which are a week behind, rose to 1.78 million, an increase of 17,000 from the previous week. The four-week moving average of claims, which helps smooth out weekly volatility in numbers, rose to 215,000, up 4,750 from the previous week.
“Weekly jobless claims are one of the most timely indicators of when the economy is beginning to take a serious turn for the worse, and the scale of new layoffs this week looks worrisome,” wrote Christopher Rupkey, chief economist at FWDBONDS. “One week is not a trend, but we can no longer be sure that calm seas lie ahead for the U.S. economy if today's weekly jobless claims are any indication.”
Nonfarm payrolls rose by 175,000 in April, below the Wall Street estimate of 240,000 and the smallest increase since October 2023. However, the unemployment rate was 3.9% and remains below 4% as of February 2022.
Markets reacted little to the unemployment claims release, with stock market futures slightly negative and government bond yields mixed.
Excluding seasonal adjustments, the number of claims was 209,324, an increase of 10.4% compared to the previous week. In New York alone there was an increase of more than 10,000, accounting for more than half of the total increase.
“Low claims had become almost monotonous, and while this surprising spike could be a blip, we should expect more volatility and a trend toward higher claims as the labor market normalizes,” said Robert Frick, a business economist at Navy Federal Credit. Union.
Federal Reserve officials are keeping a close eye on employment numbers as they continue their efforts to bring inflation back to 2%. After their meeting, policymakers noted that “job growth has remained strong.” But these comments came before the release of the April employment report.
Markets expect the central bank to start cutting interest rates in September.