Initial filings for unemployment benefits in the US climbed to their highest level since August 2023 — a sign that the robust American labor market is cooling.
Initial jobless claims increased by 22,000 to 231,000 in the week ended May 4, according to Labor Department data released Thursday — blowing past Bloomberg economists’ expectations for 212,000 applications.
The four-week moving average, which helps smooth out weekly volatility in numbers, increased to 215,000 — up 4,750 from the previous week and the highest the figure has been since February.
Until this week, first-time applications hadn’t topped the narrow 200,000-to-222,000 range in the past three months, according to Bloomberg.
The latest reading, however, indicates that the number of layoffs across US employers ticked higher.
The latest jobless claims data comes after last month’s jobs report came in weaker than expected, adding just 175,000 new roles in April — short of the 240,000 analysts were expecting and renewing rates for an interest rate cut from the Fed.
A month earlier, March had experienced an impressive 303,000 gains, while February’s headline figure rang in at 270,000. March’s reading has also since been revised up by 12,000 to a total of 315,000.
Before adjustment for seasonal influences, initial applications rose by nearly 20,000, to 209,324, which the Labor Department said was because of a jump in jobless claims New York, where upwards of 10,000 claims contributed to more than half of the latest advance.
Claims also picked up in California, where roughly 4,200 new jobless applications were filed for the week ended May 4 as the state has seen swaths of hourly workers out of a job after the state implemented a $20 minimum wage rule for fast-food workers on April 1.
Indiana and Illinois also experienced notable gains over 2,000.
Since the beginning of this month, large corporations like Peloton, Tesla and Byron Allen’s Allen Media announced hefty layoffs.
Peloton, for instance, said last week on the same day that its chief executive Barry McCarthy announced his resignation that the fitness giant would slash its headcount by roughly 15%, affecting about 400 roles.
One day later, Allen Media — which operates the Weather Channel and owns 12 cable networks and 27 ABC, CBS, Fox and NBC television stations across 21 markets — laid off about 300 employees, representing 12% of its workforce.
Tesla followed suit on Monday, revealing that it was axing staffers from its software, service and engineering departments — one month after the electric vehicle-maker disbanded its EV charging department and said it would reduce its global workforce by more than 10%.
Continuing claims — a proxy for the number of people receiving unemployment benefits — also rose by the most it has in a month, to 1.79 million in the week ended April 27.
In the face of stubbornly high inflation and a booming labor market, Wall Street walked back on its expectations for three 25-basis-point rate cuts beginning in June.
The Street was widely anticipating that only two 25-basis-point cuts would take place beginning in September.
However, JPMorgan’s chief US economist Michael Feroli said following the April jobs report that the latest employment figures has America’s largest lender banking on “a first ease in July.”
“The market is not there, but we believe that if the next two job reports show continued cooling in labor market activity, then the Fed will be comfortable taking back some of its policy restraint,” Feroli added.
Historically, a strong job market keeps wages and consumer spending levels elevated, thus fanning inflation and interest rates.
