US Weekly Jobless Claims Highest Since Oct 2021

Facts

• The number of Americans applying for unemployment benefits rose to the highest level in more than a year-and-a-half last week, the Labor Department reported Thursday.¹
• Driven by large increases in Ohio and California, initial jobless claims reportedly jumped 28K to 261K for the week ending June 3 — the highest level since October 2021.²
• In addition, the data show the unemployment rate rose to 3.7%, jumping from a five-decade low of 3.4% in April, despite employers reportedly posting over 10M job openings.³
• Meanwhile, continuing claims, including Americans who received unemployment benefits for a week or more, fell to 1.76M in the week ending May 27 — the lowest level since mid-February.⁴
• However, the economy did add 339K jobs in May, which was better than the 190K Dow Jones estimate. This marks the 29th straight month of positive job growth.⁵
• The report comes as the Fed, which has increased its key rate by five percentage points since March 2022 to about 5.1% — the highest level in 16 years — is expected to forgo a rate increase at their upcoming meeting.⁶

Sources: ¹Reuters, ²The Economic Times, ³Washington Post, ⁴Bloomberg, ⁵NBC, and ⁶Associated Press.

Narratives

• Narrative A, as provided by Fortune. The jump in jobless claims could be a sign layoffs are accelerating. It’s another sign of cracks forming in the labor market as the economy feels the full impact of the Fed’s most aggressive rate-hiking cycle in decades. While the labor market is keeping a much-feared recession at bay for now, increasing unemployment rates in the technology sector and interest rate-sensitive industries shows it can no longer be the case in the coming months.
• Narrative B, as provided by Associated Press. We must exercise caution and wait for additional confirmation before reading too much into the latest rise in jobless claims and reports of layoffs picking up. The steady job growth of the past several months shows that the labor market remains one of the healthiest parts of the weakening US economy, despite the Fed’s interest rate hikes, which have made borrowing much costlier for businesses and consumers.

Predictions