New jobless claims jumped higher during the first week of June, according to data released Thursday by the Labor Department.
In the week ending June 4, initial applications for unemployment insurance totaled 229,000, a gain of 27,000 from the previous week’s revised total of 202,000 claims. The U.S. has seen an average of 215,000 claims per week over the past four months, rising from an average of 207,000 claims in May.
Jobless claims have remained low for most of 2022 as employers struggle to fill a record number of open jobs from a workforce still smaller than it was before the onset of the coronavirus pandemic in March 2020. With roughly two open jobs for every unemployed worker, businesses have avoided laying off employees already on payroll and have seen a steady stream of consumer spending to keep business relatively strong.
New jobless claims data is often volatile and subject to steep revisions, so last week’s jump in claims will not likely trigger alarms among economists. Even so, policymakers are carefully watching the labor market for signs of a slowdown as the Federal Reserve ramps up its fight against inflation.
As the Fed raises interest rates, borrowing costs throughout the economy increase and spending by consumers and businesses tends to slow. Businesses often slow the pace of hiring or reduce the size of their staff during Fed rate hike cycles as their profit margins narrow and sales decline.
The Fed is hoping to slow the economy enough to curb inflation and bring price and wage growth down to more sustainable paces. Job openings are likely to fall off as rates get higher, and jobless claims may linger at higher levels as companies adapt to higher rates.
But many economists fear that a combination of supply chain issues and a record-hot U.S. economy could force inflation too high for the Fed to bring down without causing a deep economic downturn.
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