The number of Americans filing new claims for jobless benefits jumped last week to the highest level since late 2021, suggesting that higher interest rates were starting to weigh on the labour market.

Initial claims for state unemployment benefits increased 22,000 to a seasonally adjusted 264,000 for the week ended May 6, the highest reading since October 2021, the Labor Department said on Thursday (May 11).

Economists polled by Reuters had forecast 245,000 claims for the latest week. Claims had levelled off after surging in March as high-profile layoffs in the technology sector in late 2022 finally filtered through the data. There have also been job cuts in interest-rate sensitive industries like housing.

Claims, which remain below the 270,000-300,000 level that economists said would signal a deterioration in the labour market, are expected to rise considerably in the second half of the year as the cumulative and lagged effects of the Federal Reserve’s interest rate increases broaden out in the economy.

The labour market remains tight, with 1.6 job openings for every unemployed person in March, well above the 1.0-1.2 range that is consistent with a jobs market that is not generating too much inflation.

The Fed has raised its benchmark overnight interest rate by 500 basis points to the 5.00 per cent-5.25 per cent range since March 2022 and last week signalled it could pause its fastest monetary policy tightening campaign since the 1980s.

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The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 12,000 to 1.813 million during the week ending April 29, the claims report showed. The so-called continuing claims remain low by historical standards as some of the laid-off workers are quickly finding employment. REUTERS