The number of Americans filing new claims for unemployment benefits increased last week to the highest level since late 2021, indicating that the impact of higher interest rates on the labour market was starting to become evident.
The Labour Department reported on Thursday that initial claims for state unemployment benefits jumped 22,000 to a seasonally adjusted 264,000 for the week ending May 6, the highest number since October 2021.
Economists polled by Reuters forecasted the latest week’s 245,000 claims. As high-profile layoffs in the technology sector in late 2022 finally made their way into the data, claims peaked in March after soaring. There have also been job layoffs in industries like housing that are susceptible to interest rates.
In the second half of the year, claims are expected to go up significantly as the cumulative and lag effects of the Federal Reserve’s interest rate increases spread out in the economy. Currently, claims are below the 270,000–300,000 level that economists predicted would signal a worsening in the labour market.
With 1.6 job postings for every unemployed person in March, the labour market remained tight, far beyond the 1.0 – 1.2 range consistent with a jobs market that is not driving up inflation too high.
Since March 2022, the Federal Reserve has increased its benchmark overnight interest rate by 500 basis points to 5.00%-5.25%. Last week, the Fed hinted that it would pause its fastest monetary policy tightening campaign since the 1980s.
According to the report of the claim, the number of people getting benefits after the first week of aid—a proxy for hiring—rose 12,000 to 1.813 million in the week ending April 29. The so-called continuing claims are still at historically low levels by historical standards because some laid-off people are already looking for work.