Initial filings for unemployment benefits have hit their highest level since late August 2023, a potential sign that an otherwise robust labor market is changing.
Jobless claims totaled a seasonally adjusted 231,000 for the week ending on May 4, up 22,000 from the previous period and higher than the Dow Jones estimate for 214,000, the Labor Department reported Thursday. It was the highest claims number since Aug. 26, 2023.
The increase in claims follows a string of mostly strong hiring reports, though hiring in April was light compared with expectations. Also, job openings have been declining amid expectations that the labor market is likely to slow through the year.
The report also showed that continuing claims, which run a week behind, increased to 1.78 million, up 17,000 from the previous week. The four-week moving average of claims, which helps smooth out weekly volatility in numbers, increased to 215,000, up 4,750 from the previous week.
“Weekly jobless claims are one of the timeliest indicators of when the economy is starting to undergo serious deterioration, and the magnitude of new layoffs this week looks worrisome,” wrote Christopher Rupkey, chief economist at FWDBONDS. “One week does not a trend make, but we can no longer be sure that calm seas lie ahead for the US economy if today’s weekly jobless claims are any indication.”
Nonfarm payrolls increased by 175,000 in April, below the Wall Street estimate of 240,000 and the smallest gain since October 2023. However, the unemployment rate was at 3.9%, continuing to hold below 4% since February 2022.
Markets reacted little to the jobless claims release, with stock market futures slightly negative and Treasury yields mixed.
Excluding seasonal adjustments, claims totaled 209,324, up 10.4% from the previous week. New York alone saw an increase of more than 10,000, accounting for more than half the total rise.
“A low number of claims had become almost monotonous, and while this surprising spike could well be a blip, we should expect more volatility and a trend toward higher claims as the labor market normalizes,” said Robert Frick, corporate economist at Navy Federal Credit Union.
Federal Reserve officials are watching the jobs numbers closely as they continue efforts to bring inflation back to 2%. Following their meeting, policymakers noted that “job gains have remained strong.” But those remarks came before the April employment report release.
Markets are expecting the central bank to begin lowering interest rates in September.