WASHINGTON, June 8 (Reuters) – The number of Americans filing new claims for unemployment benefits rose to the highest level in more than 1-1/2 years last week, but the rate is likely not accelerating. layoffs as the data covers the Memorial Day holiday, which may have injected some volatility.
The largest increase in applications in nearly two years reported by the Labor Department on Thursday was driven by increases in Ohio, Minnesota and California. After rampant fraud in Massachusetts briefly boosted claims to a 1-1/2-year high in May before reversing, economists cautioned against reading too much into the latest increase.
“The jump in claims could be a sign of a pickup in layoffs, but given the volatility of claims from week to week, it’s too early to reach that conclusion,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
“The narrowness of the increase in claims by state is an additional factor that suggests we should wait for further confirmation before the end of layoffs is obtained, especially given the fraud in Massachusetts recently.”
Initial claims for state jobless benefits rose 28,000 to a seasonally adjusted 261,000 for the week ended June 3, the highest level since October 2021. Economists polled by Reuters had forecast of 235,000 claims for the last week.
Unadjusted claims rose just 10,535 to 219,391 last week, with Ohio applications up 6,345 and California filings up 5,173. Claims increased by 2,746 in Minnesota. Applications in Ohio have risen in recent weeks, which the state attributes to layoffs in the manufacturing, auto, and transportation and warehousing industries. Auto manufacturers typically shut down plants in the summer for restructuring.
“Some auto plants take a temporary break during the summer although the dates change slightly each year making it difficult for seasonal factors to get right,” said Gisela Hoxha, an economist at Citigroup in New York.
“This suggests that there may be some additional volatility in initial claims in the coming months.”
The four-week moving average of claims, considered a better gauge of labor market trends as it strips out weekly volatility, rose 7,500 to 237,250.
Economists found no impact on monetary policy from the claims data. The Federal Reserve is expected to keep its policy rate unchanged next Wednesday for the first time since March 2022 when it began its fastest interest rate hike campaign since the 1980s. The US central bank has raised its policy rate by 500 basis points since then.
Wall Street stocks are trading higher. The dollar fell against a basket of currencies. US Treasury prices rose.
GRADUAL SLOWDOWN
“Claims remain below our estimate of 305,000 to be consistent with no monthly job growth, and it will take a longer increase in the level of claims to influence the Fed’s monetary policy,” 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 was driven by the services sector, including the leisure and hospitality category, which is still catching up after businesses struggled to find workers over the past two years. Industries such as health care and education have also experienced accelerated retirements during the COVID-19 pandemic.
For some economists, however, the rise in claims suggested layoffs are spreading from the technology sector and interest rate-sensitive industries such as housing, finance and manufacturing, which made headlines last year and earlier this year, in other segments of the economy.
“The layoff announcements that get the headlines, however, usually take some time to implement,” said Stuart Hoffman, a senior economic advisor at PNC Financial in Pittsburgh, Pennsylvania. “This delay accounts for the recent increase in initial claims. This effect may also signal another increase in the coming months, with the ever-widening net of job cuts spreading across the industry.”
The labor market is gradually cooling.
The Institute for Supply Management (ISM) reported on Monday that its services PMI fell in May, mostly attributed to weakness in employment. According to ISM, comments from service businesses ranged from “we’re trying to do more with the same staff,” to being “on a hiring freeze until we have a better understanding of where the economy is headed.”
In general, employers seem reluctant to let workers go after difficulties finding work during the pandemic.
The number of people receiving benefits after a first week of aid, a proxy for hiring, fell by 37,000 to 1.757 million in the week ending May 27, the lowest level since February, the claims report showed. .
The low level of so-called persistent claims suggests that some laid-off workers are finding work easily, with 1.8 job openings for every unemployed person in April.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
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