WASHINGTON: The number of Americans filing new claims for unemployment benefits increased modestly last week, suggesting the labor market remains tight despite growing fears of a recession amid higher borrowing costs.
Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 232,000 for the week ended May 27. Economists polled by Reuters had forecast 235,000 claims for the latest week.
Claims remain very low by historical standards despite 500 basis points worth of interest rate increases from the Federal Reserve since March 2022, when the US central bank embarked on its fastest monetary policy tightening campaign since the 1980s to tame inflation.
Though the employment growth has slowed from last year’s robust pace, demand for labor remains strong. The government reported on Wednesday that there were 10.1 million job openings at the end of April, with 1.8 vacancies for every unemployed person, well above the 1.0-1.2 range that is consistent with a labor market that is not generating too much inflation.
Though there have been high-profile lays offs in the technology sector and interest rate sensitive industries like housing, employers have been generally hoarding workers following difficulties finding labor in the aftermath of the COVID-19 pandemic.
US weekly jobless claims fall more than expected
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 6,000 to 1.795 million during the week ending May 20, the claims report showed.
The claims data does not have a bearing on Friday’s employment report for May as it falls outside the survey period.
According to a Reuters survey of economists, nonfarm payrolls likely increased by 190,000 jobs in May after rising 253,000 in April. The unemployment rate is seen ticking up to 3.5% from a 53-year low of 3.4% in April.
Expectations for a slowdown in job growth were supported by the Fed’s Beige Book report on Wednesday, which described the labor market as having “continued to be strong” in May, but noted that “many contacts” were “fully staffed.”
It added that some “were pausing hiring or reducing headcounts due to weaker actual or prospective demand or to greater uncertainty about the economic outlook.”
A separate report from global outplacement firm Challenger, Gray & Christmas on Thursday showed job cuts announced by US-based employers increased 20% to 80,089 in May. Companies have announced 417,500 layoffs this year, a 315% surge from the same period last year. Excluding 2020, when the pandemic started, this is the highest January-May total since 2009.
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