US jobless claims drop; layoffs fall in May

THE number of Americans filing new claims for unemployment benefits unexpectedly fell last week as demand for labour remained strong, helping to underpin the economy amid rising interest rates and tightening financial conditions.

Initial claims for state unemployment benefits fell 11,000 to a seasonally adjusted 200,000 for the week ended May 28, the Labor Department said on Thursday (Jun 2). Economists polled by Reuters had forecast 210,000 applications for the latest week.

Claims have been largely treading water since hitting more than a 53-year low of 166,000 in March. Demand for labour remains strong, though some signs of cooling are emerging.

The Federal Reserve’s Beige Book on Wednesday showed “one district explicitly reported that the pace of job growth had slowed”, and that “some firms in most of the coastal districts noted hiring freezes or other signs that market tightness had begun to ease”.

But the government reported on Wednesday that there were 11.4 million job openings at the end of April. While the job-workers gap fell from 3.6 per cent of the labour force in March, it remained very high at 3.3 per cent in April. The US central bank is trying to dampen demand for labour, without pushing the unemployment rate too high.

Economists say claims would need to rise above 300,000 to cool the hot jobs market. Labour market strength was reinforced by a separate report from global outplacement firm Challenger, Gray & Christmas on Thursday showing that lay-offs announced by U.S.-based companies dropped 14.7 per cent to 20,712 in May.

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So far this year, employers have announced 100,694 job cuts, down 48 per cent from the same period in 2021. That is the lowest recorded January-May total since Challenger began tracking monthly job cut announcements in 1993.

The government’s closely watched employment report on Friday is expected to show strong job growth persisted in May despite rising interest rates and tightening financial conditions.

A Reuters survey of economists found that nonfarm payrolls probably increased by 325,000 jobs last month. The economy created 428,000 jobs in April, marking 12 straight months of employment gains in excess of 400,000. REUTERS