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The number of Americans requesting new jobless claims benefits increased last week to the highest level since late 2021, indicating that rising interest rates were beginning to impact the labour market.
According to data issued on Thursday by the Labour Department, the number of first claims for state unemployment benefits increased by 22,000 to a seasonally adjusted 264,000 for the week ending May 6, the highest level since October 2021.
Economists surveyed by Reuters had predicted 245,000 claims for the latest week. Claims dropped after spiking in March as high-profile layoffs in the IT industry in late 2022 finally trickled into the numbers. Additionally, there have been layoffs in interest rate-sensitive sectors like the housing industry.
The second half of the year is anticipated to see a significant increase in claims as the cumulative and lag effects of the Federal Reserve’s interest rate increases spread throughout the economy. Currently, jobless claims are below the 270,000–300,000 level that economists predicted would indicate a worsening in the labour market.
The labour market is still tight, with 1.6 job vacancies for every jobless person in March, considerably above the 1.0-1.2 range and consistent with a jobs market that is not driving up inflation too much.
Since March 2022, the Fed has increased its benchmark overnight interest rate by 500 basis points, bringing it to a range of 5.00%-5.25%. Last week, the Fed hinted that it would halt the quickest monetary policy tightening campaign since the 1980s.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 12,000 to 1.813 million during the week ending April 29, the claims report showed. The so-called continuing claims remain low by historical standards as some laid-off workers quickly find employment.
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