US jobless claims drop after 9-month peak

Fewer Americans applied for unemployment benefits last week, indicating that layoffs remain at historically low levels, even though there are signs that the labor market is cooling.

For the week ending May 11, jobless claims dropped by 10,000 to 222,000, down from the previous week’s 232,000, the Labor Department reported on Thursday. Despite last week’s applications being the highest since the last week of August 2023, the number of layoffs is still relatively low.

The four-week average of claims, which helps smooth out week-to-week fluctuations, increased by 2,500 to 217,750.

Weekly unemployment claims are seen as an indicator of U.S. layoffs and the job market’s future direction. These claims have stayed at historically low levels since millions of jobs were lost at the start of the COVID-19 pandemic in spring 2020.

In April, U.S. employers added just 175,000 jobs, the lowest number in six months, suggesting the labor market may be cooling. The unemployment rate rose slightly to 3.9% from 3.8% but has remained below 4% for 27 consecutive months, the longest streak since the 1960s.

The government also reported that there were 8.5 million job openings in March, the lowest number in three years.

A slower pace of hiring, coupled with a slowdown in wage growth, could provide the Federal Reserve with the data it needs to consider cutting interest rates. A cooler reading on consumer inflation in April might also influence the Fed’s next rate decision.

The Federal Reserve has raised its benchmark borrowing rate 11 times since March 2022 to combat the four-decade high inflation that followed the economy’s rebound from the COVID-19 recession of 2020. The Fed aimed to loosen the labor market and cool wage growth to curb inflation.

Many economists feared that rapid rate hikes could trigger a recession, but jobs remain plentiful, and the economy is broadly healthy due to strong consumer spending.

Although layoffs are still low, more job cuts have been announced recently, particularly in the technology and media sectors. Companies like Google parent Alphabet, Apple, and eBay have announced layoffs. Outside of tech and media, Walmart, Peloton, Stellantis, Nike, and Tesla have also announced job cuts.

In total, 1.79 million Americans were collecting jobless benefits during the week ending May 4, an increase of 13,000 from the previous week.