Jobless claims tick higher ahead of critical May jobs report

A Now Hiring sign at John F. Kennedy Plaza, commonly known as Love Park, in Philadelphia, Monday, Nov. 29, 2021. (AP Photo/Matt Rourke)

Unemployment claims rose to a four-week high last week ahead of the May jobs report, a critical data point for the Federal Reserve as it weighs whether to start cutting interest rates this year.

New first-time applications for jobless aid increased by 8,000 to 229,000 for the week ending June 1, the Labor Department reported Thursday. Claims for the previous week were revised up by 2,000 to 221,000.

The less volatile 4-week moving average dropped by 750 claims compared to the prior reading, landing at 222,250.

Unemployment has remained below 4 percent since January 2022, with the job market showing surprising strength even as the Federal Reserve has been tightening its monetary policy over that period.

But signs of stress in the labor market have begun to show, with the unemployment rate ticking up from 3.4 percent in April 2023 to 3.9 percent in April 2024.

The economy added 175,000 jobs in that month, down from 315,000 in March and 236,000 in February.

Job openings fell in April to their lowest level since February 2021 at 8.1 million open jobs, the Labor Department reported this week. The number of vacant positions per job seeker stands at 1.25, a ratio that still favors workers but less favorably than in recent years when it was closer to 2-to-1.

The Federal Reserve hiked interest rates eleven times in a row starting in March 2022, winding up at an effective rate of 5.33 percent, where it has remained for nearly a year. The central bank also decreased the money supply over that period, though it has been going back up since August.

Many economists expected the Fed’s rapid tightening to set off a recession, but those concerns proved to be unfounded as trillions in both fiscal and monetary stimulus worked their way through the economy and helped to keep workers employed.

Investors have been hoping for a rate cut this year even as inflation has hovered around 3-percent since last June. Additional job losses in the Friday jobs report could keep those hopes alive, though they may not be in time to affect the nation’s economic mood ahead of the November election.

The chances of the Fed maintaining interest rates at their current level are 100 percent for the committee’s next meeting in June, according to financial data company CME’s Fed Watch prediction algorithm.

The algorithm had a 58-percent probability for a quarter-point cut in September as of Thursday morning, with the probability of holding steady in that month at 31.7 percent.


Copyright 2023 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.