US weekly jobless claims hit 1.5-year high, economists urge caution

  • Weekly jobless claims increase from 28,000 to 261,000
  • Continuing claims drop 37,000 to 1.757 million

WASHINGTON, June 8 (Reuters) – The number of Americans filing new claims for unemployment benefits rose to its highest level in more than a year and a half last week, but layoffs are unlikely to accelerate as the data covered the Memorial Day holiday, which could have injected some volatility.

The biggest increase in claims in nearly two years reported by the Labor Department on Thursday was led by increases in Ohio, Minnesota and California. After rampant fraud in Massachusetts briefly boosted claims to a year-and-a-half high in May before being revised, economists warned against reading too much of the latest rise.

“The jump in claims could be a sign of a resumption of layoffs, but given the week-to-week volatility of claims, it’s too early to draw that conclusion,” said Conrad DeQuadros, senior economic adviser at Brean Capital in New York. York.

“The narrowness of the increase in claims by state is another factor suggesting that we should wait for further confirmation before concluding that layoffs have resumed, particularly given the fraud in Massachusetts recently.”

Initial claims for state unemployment benefits jumped from a seasonally adjusted 28,000 to 261,000 for the week ended June 3, the highest level since October 2021. Economists polled by Reuters had forecast 235,000 claims for the latest week.

Unadjusted claims rose just 10,535 to 219,391 last week, with claims in Ohio up 6,345 and filings in California up 5,173. Claims rose 2,746 in Minnesota. Applications in Ohio have increased in recent weeks, attributed by the state to layoffs in the manufacturing, automotive, transportation and warehousing sectors. Automakers usually close their factories in the summer to retool.

“Some auto plants take temporary breaks during the summer, although the dates change slightly each year, making it difficult to properly account for seasonal factors,” said Gisela Hoxha, an economist at Citigroup in New York.

“This implies that there may be some additional volatility in initial claims over the coming months.”

The four-week moving average of claims, seen as a better measure of labor market trends because it eliminates week-to-week volatility, rose by 7,500 to 237,250.

Economists saw no impact on monetary policy from the claims data. The Federal Reserve is expected to keep its key rate unchanged next Wednesday for the first time since March 2022, when it launched its fastest interest rate hike campaign since the 1980s. The US central bank raised its rate leader by 500 basis points since then.

Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. US Treasury prices rose.

Hundreds of people line up outside the Kentucky Career Center, more than two hours before it opens, to find help with their unemployment claims, in Frankfort, Kentucky, U.S., June 18, 2020. REUTERS/Bryan Woolston
Unemployment benefit claims


“Claims remain well below our estimate of 305,000 to be consistent with the lack of monthly job growth, and it will take a more sustained increase in the level of claims to influence Fed monetary policy,” he said. said Matthew Martin, an American economist at Oxford Economics in New York.

The government announced last week that the economy added 339,000 jobs in May. Although the jobless rate hit a seven-month high of 3.7%, from 3.4% in April, it remains low by historical standards.

Job growth is led by the service sector, including the leisure and hospitality category, which continues to catch up after businesses struggled to find workers over the past two years . Sectors like health and education have also seen accelerated retirements during the COVID-19 pandemic.

For some economists, however, the rise in claims suggested the layoffs were spreading from the tech sector and interest-rate-sensitive industries like housing, finance and manufacturing, which grabbed headlines last year and the rest of the world. beginning of this year, to other segments of the economy.

“However, layoff announcements that make headlines usually take a while to materialize,” said Stuart Hoffman, senior economic adviser at PNC Financial in Pittsburgh, Pennsylvania. “This delay explains the recent surge in initial claims. This effect could also portend another escalation in the coming months, alongside the ever-widening web of layoffs spreading across industries.”

The labor market is gradually cooling.

The Institute for Supply Management (ISM) reported on Monday that its services PMI fell in May, mainly due to weak employment. According to the ISM, comments from service companies ranged from “we’re trying to do more with the same staff” to “a hiring freeze until there’s a better understanding of where the economy is headed.” “.

Overall, employers appear reluctant to lay off workers after struggling to find labor during the pandemic.

The number of people receiving benefits after a first week of help, a proxy for hiring, fell by 37,000 to 1.757 million in the week ending May 27, the lowest level since February, according to the complaints report.

The low level of so-called continuing claims suggests that some laid-off workers are still finding work easily, with 1.8 job offers for every unemployed person in April.

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci

Our standards: The Thomson Reuters Trust Principles.

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