US jobless claims rise to 215,000, topping estimates

Initial jobless claims rose to 215,000 last week, exceeding the 211,000 consensus estimate and reaching the highest level in more than a month.

US initial jobless claims rose to 215,000 in the week ended May 23, exceeding economists' estimates of 211,000 and reaching the highest level in more than a month, Labor Department data showed Thursday. The prior week's tally was revised up to 212,000 from an initially reported 210,000.

"Raising rates to weaken demand doesn't address the root cause behind supply shock-driven inflation," said Tom Barkin, president of the Federal Reserve Bank of Richmond, in a speech in North Carolina. "It doesn't free up trade routes, reopen factories, or melt ice."

Continuing claims, which track the unemployed population still seeking work, rose to about 1.79 million in the week ended May 16 from the prior week's revised count of about 1.776 million. The four-week moving average of initial claims, which smooths out week-to-week volatility, rose by about 6,300 to 209,000. Despite the increase, the number of Americans signing up for unemployment benefits has stabilized in a low range of mostly 200,000 to 250,000 a week since the US economy emerged from the pandemic recession in 2020, suggesting most companies have not resorted to widespread layoffs even as some high-profile tech firms announced job cuts.

The modest uptick in claims comes as the Iran war has clouded the economic outlook, with higher energy prices squeezing consumers and businesses. US gasoline prices have surged to an average of $4.43 a gallon from $2.98 on the eve of the conflict, according to AAA. The closure of the Strait of Hormuz, through which a fifth of the world's oil passes, has caused the biggest disruption of global oil supplies in history, according to Abu Dhabi National Oil Co. Chief Executive Officer Sultan Al Jaber. Even if the conflict ended immediately, Middle East oil flows would not fully recover until well into 2027, Al Jaber said. Brent crude traded near $104 a barrel Thursday, down from session highs above $108 on reports of progress in US-Iran peace negotiations.

The labor market has shown resilience even as hiring has slowed from the post-pandemic boom. Companies, nonprofits and government agencies added an average of 76,000 jobs a month from January through April, compared with 122,000 a month in 2024 and nearly 400,000 a month from 2021 through 2023, according to Labor Department data. The unemployment rate stood at 4.3% in April, low by historical standards. President Donald Trump's immigration crackdown and ongoing Baby Boomer retirements have pushed the monthly break-even rate of hiring needed to keep unemployment from rising potentially as low as zero, economists estimate.

The data adds to the challenge facing the Federal Reserve as it navigates supply-driven inflation from the Iran conflict. Bond yields have climbed sharply, with the 10-year Treasury yield nearing 4.7%, signaling that investors expect higher inflation to persist. The 2-year Treasury yield has risen to 4.1%, well above the upper end of the Fed's target range of 3.50% to 3.75%. About 60% of traders see the Fed ending the year with higher rates than current levels, according to CME data. Barkin said the Fed's current policy stance is "well-positioned" to respond throughout the rest of the year, though he expressed concern that the US economy may be entering an era of more frequent supply shocks as geopolitical tension and a breakdown in the global trade order ripple through the economy. The last time the Fed faced a comparable supply shock was during the 2022 energy crisis following Russia's invasion of Ukraine, when the central bank embarked on its most aggressive tightening cycle in four decades.

This article is for informational purposes only and does not constitute investment advice.