Washington, June 9 (BNA): The number of Americans filing new applications for unemployment benefits rose to the highest level in more than a year and a half last week, but layoffs likely won’t accelerate as the data covered the Memorial Day holiday. That could inject some volatility.
The largest increase in claims in nearly two years reported by the Labor Department Thursday was driven by increases in Ohio, Minnesota and California. After an outbreak of fraud in Massachusetts briefly boosted claims to a high of 1-1/2 in May before being revised away, economists cautioned against reading too much into the recent rally.
said Conrad de Quadros, chief economic advisor at Brean Capital in New York, Reuters reported.
“The narrowness of the increase in claims by state is another factor that suggests we should wait for additional confirmation before we finalize layoffs, especially given the fraud in Massachusetts recently.”
Initial claims for state unemployment benefits jumped 28,000 to 261,000 claims for the week ending June 3, the highest level since October 2021. Economists polled by Reuters had expected 235,000 claims in the final week.
Unadjusted claims only increased from 10,535 to 219,391 last week, with claims in Ohio up 6,345 and filings in California up 5,173. Claims increased by 2,746 in Minnesota. Orders have soared in Ohio in recent weeks, which the state attributed to layoffs in the manufacturing, auto, transportation and warehousing industries. Car manufacturers usually close their factories in the summer to retool them.
“Some auto plants take temporary breaks during the summer, although the dates change slightly each year, making it difficult for seasonal factors to capture them properly,” said Gisela Hoxa, an economist at Citigroup in New York.
“This means there could be some additional volatility in initial claims over the coming months.”
The four-week moving average for claims, which is considered a better measure of labor market trends because it smooths out weekly volatility, rose 7,500 to 237,250.
Economists saw no impact on monetary policy from the claims data. The Federal Reserve is expected to keep interest rates unchanged next Wednesday for the first time since March 2022 when it embarked on its fastest rate hike since the 1980s. The US central bank has raised interest rates by 500 basis points since then.
Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. US Treasury bond prices rose.
said Matthew Martin, a US economist at Oxford Economics in New York.
The government reported last week that the economy added 339,000 jobs in May. Although the unemployment rate rose to a seven-month high of 3.7% from 3.4% in April, it remains low by historical standards.
Job growth is being led by the services sector, including the leisure and hospitality category, which is still catching up after companies struggled to find workers over the past two years. Industries such as healthcare and education have also seen accelerated retirements during the COVID-19 pandemic.
But to some economists, the jump in claims indicated that layoffs were spreading from the technology sector and interest rate-sensitive industries like housing, finance and manufacturing, which made headlines last year and early this year, to other sectors of the economy.
“Layoff announcements that make headlines usually take some time to be implemented,” said Stuart Hoffman, chief economic advisor at PNC Financial in Pittsburgh, Pennsylvania. “This delay explains the recent spike in initial claims. This impact could also herald another escalation in the coming months, along with the web of growing job cuts spread across industries.”
The job market is gradually cooling down.
The Institute for Supply Management (ISM) reported on Monday that the services PMI fell in May, mostly due to weak hiring. According to the ISM, feedback from service companies ranged from “we’re trying to do more with the same employees,” to “freezing hiring until there’s a better understanding of where the economy is going.”
In general, employers seem reluctant to let go of workers after difficulties finding work during the pandemic.
The number of people receiving benefits after an initial week from Help, a proxy for employment, fell by 37,000 to 1.757 million during the week ending May 27, the claims report showed, the lowest since February.
The low level of so-called continuing claims indicates that some laid-off workers are still finding work easily, with 1.8 jobs created for every unemployed person in April.