Weekly unemployment claims rose slightly but remained near historically low levels, while economists said upcoming labor and inflation data will help shape the Federal Reserve’s next policy decision.
By yourNEWS Media Newsroom
New unemployment claims rose modestly last week but remained low by historical standards, signaling that the U.S. labor market continues to show resilience despite slower hiring, changing workforce dynamics and concerns over inflation.
Weekly applications for unemployment benefits remain below levels seen a year earlier, and broader labor indicators suggest employment conditions have been relatively steady in recent months. Economists said the data show that layoffs remain contained even as some major companies announce planned job cuts.
“The number of individuals applying for unemployment insurance benefits last week remained low, indicating the labor market is stable despite a falling hiring rate,” Jeffrey Roach, chief economist for LPL Financial, told The Epoch Times in an emailed note.
The four-week average of jobless claims, which smooths out weekly volatility, increased to 209,000, a smaller rise than expected. Continuing claims, which measure the number of people already receiving unemployment benefits, stayed below 1.8 million for the eighth straight week. Recurring claims rose to 1.79 million from 1.77 million the previous week.
Economists use continuing claims as one measure of how difficult it is for unemployed workers to find new jobs. The figure can also be affected by people exhausting benefits, since many states limit unemployment eligibility to 26 weeks.
Hiring data also suggest that employers are still adding workers heading into the summer. Payroll processor ADP reported that private employers added an average of 35,750 jobs per week in the four weeks ending May 9. Although hiring slowed for the first time in three weeks, private-sector job growth has remained elevated since late March.
Additional labor market data will be released next week, including job openings, layoffs and May nonfarm payrolls. Early forecasts from Trading Economics suggest the economy added about 102,000 jobs this month, while the unemployment rate may have risen to 4.4%.
The numbers will be closely watched by Federal Reserve officials ahead of their June 16-17 policy meeting. Policymakers are weighing whether the labor market remains strong enough to withstand higher interest rates as inflation stays above the central bank’s target.
“I am focusing heavily on inflation. I’m not ignoring at all the labor market. We need to pay attention to both sides, but the labor market is in decent shape right now, while inflation is simply much too high,” Minneapolis Fed President Neel Kashkari told CNBC on May 28.
Investors widely expect the Federal Reserve to leave rates unchanged and may begin pricing in the possibility of another rate increase later this year if inflation remains persistent.
“The Fed and its new Chair, Kevin Warsh, are in a difficult spot,” Josh Rubin, client portfolio manager at Thornburg Investment Management, said in a note emailed to The Epoch Times. “It’s going to be tough to argue for rate cuts with a straight face in the current environment.”
Labor market conditions have changed over the past year as immigration slowed and labor force participation shifted. The unemployment rate remains historically low, and Warsh said during his Senate confirmation hearing that the labor market is at full employment.
Some economists say the number of new jobs needed to keep unemployment stable has fallen sharply. Dallas Fed economists estimate the breakeven rate may be close to zero, meaning the economy may not need many new jobs each month to keep the unemployment rate from rising substantially.
Public concern over job security remains elevated, especially as artificial intelligence becomes more embedded in the economy. A May 14 paper from the New York Fed found little correlation between AI exposure and declines in job postings, offering a mixed picture of the technology’s near-term impact on employment.
Roach said AI is more likely to change work than eliminate it outright.
“AI is likely to reshape rather than simply eliminate jobs, with efficiency gains potentially increasing demand for AI-enabled work while raising the premium on adaptability and human judgment,” Roach said.
The labor figures came alongside fresh economic data showing slower growth and renewed inflation pressure. U.S. gross domestic product was revised down to 1.6%, compared with the Bureau of Economic Analysis’s initial estimate of 2%.
Durable goods orders, however, rose 7.9% in April, far above the 3.5% consensus estimate. March’s durable goods reading was also revised higher, to 1.3% from 0.8%.
Inflation remained a concern. The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures Price Index, rose to 3.8% annually in April from 3.5%. Core PCE inflation, which excludes food and energy, increased to 3.3% from 3.2%.
Personal income was flat in April, while consumer spending rose 0.5%. Economists said households may become more cautious if inflation continues to outpace wage growth and borrowing costs remain high.
For now, the labor market remains one of the stronger areas of the economy. Low layoffs, steady claims and continued private hiring suggest employers are not broadly cutting staff, even as inflation and slower growth complicate the outlook for the Federal Reserve and consumers.