Initial jobless claims rose sharply last week, a possible sign that the job market is softening after more than a year of rate hikes.
The Labor Department said on Thursday that initial jobless claims totaled a seasonally adjusted 261,000 in the week ended June 3, up 28,000 from the upwardly revised level of the previous period.
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The total was well above the Dow Jones estimate of 235,000 and was the highest weekly price since October 30, 2021.
That weekly surge pushed the four-week moving average of claims up 7,500 to 237,250, the highest since April 29. Continuing claims, which are a week behind the headline number as they measure those who made claims for multiple weeks, fell by 37,000 to 1.757 million.
The Department of Labor did not name a specific factor for the increase. The unadjusted total was 219,391, up 10,535 or 5% from the previous week. Seasonal factors would have indicated a 6% decline, the department noted.
As of May 20, a total of 1.635 million people were claiming unemployment benefits, up from 1.283 million a year earlier, an increase of 27.4%.
“One week’s worth of data is not nearly enough to conclude that claims claims are now picking up significantly, but other indicators have been pointing to an increase in claims claims for some time,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics . “Higher claims are also consistent with the ongoing deterioration in credit availability and the lagged impact of Fed tightening.”
The report comes less than a week before the next Federal Reserve meeting, when central bank policymakers must decide their next rate move.
Markets are expecting the Fed to refrain from raising interest rates at the two-day meeting that ends on Wednesday. According to CME Group data, the probability of no increase increased to 73.6% after the claims data was released, from about 65% before the release. A less resilient labor market reduces pressure on the Fed to tighten monetary policy as rising employment and wages have been a factor in high inflation.
Since March 2022, the Fed has raised interest rates ten times to a target range of 5% to 5.25%. During this period, the labor market has shown resilience and non-farm payrolls increased by almost 1.6 million in 2023.
The May jobs report, however, revealed some cracks in the armor: the unemployment rate rose 0.3 percentage points to 3.7% as the household survey showed a drop of 310,000 people who said they were employed.
Inflation has fallen as the Fed has hiked rates but is still well above the central bank’s 2% target.
The Fed will take a final look at inflation data ahead of the meeting when the Bureau of Labor Statistics releases the May CPI report on Tuesday. According to a FactSet estimate, headline CPI is expected to rise just 0.1% on a monthly basis, while core consumption excluding food and energy is expected to rise 0.4%.
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