U.S. jobless claims rise slightly as labor market remains healthy

The number of Americans applying for unemployment benefits increased slightly last week, but remains at healthy levels that continue to show a strong US labor market.

US jobless claims were 232,000 for the week ending May 27, an increase of just 2,000 from the previous week.

The weekly claims figures are considered representative of the number of layoffs in the United States.

The four-week moving average for claims, which smooths out some of the week-over-week volatility, fell from 2,500 to 229,500.

Since the pandemic purge of more than 20 million jobs three years ago, the US economy has added jobs at a breakneck pace and Americans have enjoyed unusual job security. And this, despite interest rates that have been rising for more than a year and fears of an impending recession.

In early May, the Fed raised its benchmark lending rate for the 10th consecutive time in its attempt to cool the economy and bring down inflation that has been high for four decades. Part of the Fed’s goal is to cool the labor market, which still favors workers, although there have been some signs of weakness in recent months.

In April, US employers added 253,000 jobs and the unemployment rate fell to 3.4%, matching a 54-year low. But the February and March numbers were revised down by 149,000 jobs, potentially signaling that the Fed’s rate policy strategy is starting to cool the labor market.

The May jobs report comes out on Friday. Analysts predict U.S. employers added 188,000 jobs in May — not a bad number, but a far cry from the average monthly hiring gains of the past three years.

Somewhat surprisingly on Wednesday, the government announced that job openings in the United States rose in April, with employers posting 10.1 million job openings, up from 9.7 million in March and the most since January. Economists had expected job vacancies to slip below 9.5 million.

Wednesday’s job vacancies report — along with layoff data and Friday’s jobs report — could help sway Fed officials one way or the other regarding its next rate hike.

The Fed hopes to achieve a so-called soft landing – lowering growth just enough to bring inflation under control without causing a recession. Economists are skeptical, with many expecting the United States to slide into recession later this year.

Markets are hoping the Fed will suspend rate hikes at its next meeting. Minutes from the Fed’s latest meeting showed Fed officials split on whether to raise its benchmark borrowing rate.

Last week, the Commerce Department reported that the U.S. economy grew at a lackluster 1.3% annual rate from January through March as businesses fearing an economic slowdown cut inventory. This is a slight improvement on its initial growth estimate of 1.1%.

There has been a growing number of high-profile layoffs recently, mostly in the tech sector, where many companies now admit to over-hiring during the pandemic. IBM, Microsoft, Salesforce, Twitter, Lyft, LinkedIn and DoorDash have all announced layoffs in recent months. Amazon and Facebook parent company Meta have each announced two rounds of job cuts since November.

Outside of the tech sector, McDonald’s, Morgan Stanley and 3M also recently announced layoffs.

Overall, 1.8 million people were collecting unemployment benefits the week ending May 20, about 6,000 more than the previous week.

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