First-time applications for unemployment benefits surged to 231,000 last week, marking the highest level since August and signaling a potential cooling off of the white-hot labor market. According to the Bureau of Labor Statistics, continuing claims also saw an uptick of 17,000 to reach 1.78 million.
This data comes shortly after the monthly jobs report revealed a lower-than-expected addition of 175,000 positions in April, a notable decline from previous months. Despite this, the average monthly job growth remains strong at 245,500, though slightly lower than the 2023 average.
While the unemployment rate edged up to 3.9% in April, it continues a streak of 27 consecutive months below 4%, reminiscent of trends from the late 1960s. However, economists caution against interpreting one week’s data as a definitive trend.
Chris Rupkey, chief economist at Fwdbonds, highlights an increase in company layoffs, suggesting caution among businesses regarding the economic outlook for the second half of the year. The Federal Reserve’s efforts to combat inflation through interest rate hikes have yet to significantly impact the labor market, though Fed Chair Jerome Powell notes a cooling demand compared to previous years.
Ian Shepherdson at Pantheon Economics emphasizes the need for sustained elevated readings in jobless claims to indicate a genuine trend shift, noting historical precedents where apparent economic stability abruptly changed. As uncertainties loom, economists remain vigilant in monitoring indicators for potential shifts in the economic landscape.
