Unemployment claims rise to highest level in 8 months, signaling slowdown

Yahoo

2 days ago

Initial claims for U.S. unemployment benefits last week rose to their highest level in eight months, a sign the labor market might be losing steam as concerns over tariffs take hold of U.S. businesses and consumers.
New applications for jobless benefits in the week ending May 31 reached 247,000, up 8,000 from the week prior, data from the Labor Department shows. The figure exceeded economists' predictions of 235,000 claims, according to financial data firm FactSet.
Overall filings for unemployment claims remain at historic lows. The total number of Americans receiving unemployment benefits for the week of May 24 was 1.9 million, down 3,000 from the week prior.
Still, the uptick in initial jobless claims last week is "hard to dismiss," Oliver Allen, senior U.S. economist at Pantheon Macroeconomics, said, as the climb could point to broader shifts in the workforce ahead of the May jobs report, to be released tomorrow.
"Moreover, a relatively weak hiring rate means that the share of newly unemployed workers who are struggling to find a new job quickly is slowly creeping up, too," he said in an email note. "The further downward pressure on hiring from tariff-related uncertainty will add to these growing strains on the jobs market."
Jobless claims have mostly floated between 200,000 to 250,000 since the COVID-19 pandemic in 2020 upended the labor market.
"Jobless claims continue to rise, but they are rising at a slow pace, so it's a trend worth watching, but too soon to sound the alarm," said Chris Zaccarelli, chief investment officer for Northlight Asset Management.
Firings overseen by the Trump Administration's Department of Government Efficiency, commonly known as DOGE, are the leading cause of job cuts in 2025, with over 280,000 federal workers abruptly terminated from jobs so far this year, according to outplacement firm Challenger, Gray & Christmas.
Other signs of potential slowdown
A national employment report released yesterday by ADP, a payroll and human resources software provider, found that the U.S. economy added 37,000 jobs in May, the lowest pace of hiring since May 2023.
"After a strong start to the year, hiring is losing momentum," said Nela Richardson, chief economist at ADP, in a statement Wednesday.
Another sign of a cooling labor market: The number of Americans who quit their jobs fell in April, while layoffs climbed, according to the most recent data from the U.S. Bureau of Labor Statistics. That's despite the fact job openings for the month increased, reaching 7.4 million in April.
Layoffs at large U.S. companies
Several major companies have revealed layoffs this year including Walmart, which announced in late May that it was reducing 1,500 employees from its global tech workforce in a bid to increase efficiency rapidly evolving technological advances.
On Thursday, Consumer goods retailer Procter & Gamble, the company behind many major household brands including Tide detergent, Bounty paper towels and Pampers diapers, announced this week that it would cut 7,000 employees from its workforce over the next two years, as it competes in an "increasingly challenging environment."
Workday, Dow, CNN, Starbucks, Southwest Airlines, Walt Disney Co., Microsoft and Facebook parent company Meta have also announced layoffs this year.
While job cuts by U.S.-based employees were down 12% in May from the previous month, according to new data from Challenger, Gray & Christmas, they are up 47% from the same month last year.
"Tariffs, funding cuts, consumer spending and overall economic pessimism are putting intense pressure on companies' workforces," said Andrew Challenger, senior vice president of the outplacement firm. Many companies have lowered their sales and profit expectations for 2025 in their recent earnings statements. And consumer confidence remains shaky, despite some signs of relief.
The Labor Department is expected to report Friday that employers added 130,000 jobs last month, down from 177,000 in April. The unemployment rate is expected to stay at a low 4.2%, according to a survey of forecasters by the data firm FactSet.
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