The number of Americans filing for unemployment benefits has risen to its highest point in 10 months, indicating potential strain on the labor market due to high interest rates.
For the week ending June 8, jobless claims increased by 13,000, reaching 242,000, up from 229,000 the previous week, according to the Labor Department’s report released on Thursday. This figure surpassed analysts’ predictions of 225,000 new claims and marked the highest level since August 2023.
The four-week average of , which helps smooth out week-to-week fluctuations, also climbed to 227,000, an increase of 4,750 from the previous week, signifying the highest level since September.
Weekly unemployment claims serve as a gauge of U.S. layoffs and the overall health of the job market. Despite this recent surge, claims have remained historically low since the substantial 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 persist at this pace, it could have an impact on Federal Reserve officials, who closely monitor the labor market when making interest rate decisions.
Since March 2022, the Federal Reserve has increased its benchmark borrowing rate 11 times to combat the highest inflation in four decades, which emerged following the economy’s recovery from the COVID-19 recession. The objective was to cool a hot labor market and slow wage growth, which can fuel inflation.
Despite projections that these rapid rate hikes would trigger a recession, robust consumer demand and a resilient labor market have thus far prevented this outcome.
Although a report on Wednesday showed 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 further evidence that price increases are heading towards 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 most recent government report exhibited signs of a potential slowdown. The unemployment rate ticked upward 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 decreased to 8.1 million in April, the lowest number of vacancies since 2021.
Although layoffs remain relatively low, some prominent 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.