The number of Americans filing for jobless benefits has surged to the highest level in 10 months, suggesting that the labor market may be feeling the strain of high interest rates.
For the week ending June 8, unemployment benefit applications increased by 13,000, reaching 242,000, up from 229,000 the previous week, according to the Labor Department’s report on Thursday. This figure exceeded analysts’ expectations of 225,000 new claims and marked the highest level since August 2023.
The four-week average of claims, which helps to smooth out week-to-week fluctuations, also rose to 227,000, an increase of 4,750 from the prior week, marking the highest level since September.
Weekly unemployment claims serve as an indicator of U.S. layoffs and the overall direction of the job market. Despite this recent increase, claims have remained historically low since the massive job losses triggered by the COVID-19 pandemic in spring 2020.
While the latest figures are relatively high, they still fall within a range indicative of a healthy labor market. However, if layoffs continue at this level, it could impact Federal Reserve officials, who closely monitor the labor market when making interest rate decisions.
Since March 2022, the Federal Reserve has raised its benchmark borrowing rate 11 times to curb the highest inflation in four decades, which emerged after the economy rebounded from the COVID-19 recession. The goal was to cool a hot labor market and slow wage growth, which can drive inflation.
Despite predictions that these rapid rate hikes would trigger a recession, strong consumer demand and a resilient labor market have so far prevented this outcome.
Although a report on Wednesday indicated a slight cooling in consumer inflation last month, the Federal Reserve maintained its benchmark lending rate at a 23-year high. Fed Chair Jerome Powell emphasized the need for more evidence that price increases are heading toward the 2% target.
In May, U.S. employers added a robust 272,000 jobs, an increase from April, indicating that companies remain confident in the economy despite high interest rates.
However, the latest government report showed signs of a potential slowdown. The unemployment rate edged up for the second consecutive month to 4%, from 3.9%, ending a 27-month streak of unemployment below 4%. This streak was the longest since the late 1960s.
Additionally, job openings fell to 8.1 million in April, the lowest number of vacancies since 2021.
Although layoffs remain relatively low, some high-profile companies, particularly in the technology and media sectors, have announced job cuts. Google parent company Alphabet, Apple, and eBay are among those recently announcing layoffs.
Other companies outside of tech and media, such as Walmart, Peloton, Stellantis, Nike, and Tesla, have also announced job cuts recently.
In total, 1.82 million people were collecting jobless benefits during the week ending June 1, an increase of 30,000, the highest number since early this year.
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